No one really has a good explanation for the market’s behavior over the past two days. Justifiably, the market drops throughout the day as the economic reports reveal a worsening economy. That is, at least until the last hour of trading. For some reason, 3pm seems to be the key hour for a significant daily rise. Weird.
I’ve noticed a strange calmness this week and maybe that has something to do with it. Of course I’m not sure, but I think that we’ve reached a point where everyone has just taken a wait-and-see approach, but have our fingers on the trigger to either jump in or out in a moments notice.
I believe Charles Kirk seems to have described it best in his report today.
The so-called smart money is decidedly neutral - neither bullish as they were last summer and far from as bearish as they were when the market bottomed out back in 2003.
It’s a continuation of what NBER’s Martin Feldstein stated a couple of weeks ago when he reported:
The current situation has the elements of a Catch-22: The credit flows needed for economic expansion require confidence in the values of existing financial assets, but market participants may not have such confidence while the risk of recession hangs over us.
Both the bulls and the bears have reached a stalemate, or a point of indecision. It’s a fight, a battle of wills, and both sides refuse to give in.
So, to get a clearer picture of what’s happening, I asked another expert what he sees ahead for this fight. I tend to agree with his prediction.
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Hmm.. that suspicious 3pm comeback theme came into play again today. While the markets still ended up in the red, things could have been MUCH worse.
I’ve had my suspicions about the cause of this activity, but couldn’t find any mainstream financial media sites or other financial weblogs discussing these unusual market movements.
That is until I read Phillip Lyon’s weblog post, which confirmed my suspicions and “hit the nail on the head” about hedge funds.
This recession is going to cause a lot of pain in the hedge fund sector and I’d be willing to “speculate” that we’re going to be hearing a lot of bad news about major hedge fund losses, investors dissatisfaction, and hedge fund failures in the near future.
Posted 07 Mar 2008 at 2:50 pm ¶Post a Comment