The short lived sell-off is the recent effort of market manipulators to use the positions on hand to drive market down. Since this is only overbought positions of market manipulators during short covering in the last sell-off, the amount available for selling is limited and thus the duration lasts less than two sessions. The sell-off attracts day traders and speculators to follow on the two days. But market participants do not react overly based on experience in prior sell-off. Instead, when market manipulators finish the selling, market participants follow closely and start to recover or buy back. As a result there is not extended panic selling and market manipulators make only relatively small profit as compared to prior sell-off events.
Many investors including institutional investors, individual investors, as well as hedge funds are still holding large amount of cash and waiting for market dip so that the portfolio can be replenished for the trimming in the last sell-off. As a result, there is no extended panic selling similar to that happened after US debt downgrade at which time market participants saw the first panic selling initiated by market manipulators after a long gradual selling from year high.
Since market peak in May, market manipulators have triggered one slow extended sell-off and four panic quick sell-off. The sell-off duration becomes shorter in each occurrence. If market manipulators have not acquired the positions sold in this sell-off at the bottom of last sell-off, a short-covering rally would cut a lot of the profit. If market manipulators maintain the sell-off strategy, the risk would be higher since equity positions are liquidated and new short selling positions will be needed for the next sell-off and it will require a larger stretch of the selling period, which is indeed getting shorter each time, to provide enough room for short selling and then short covering to make profit. Market participants would watch closely on the strategy of market manipulators next move. It may be extended panic selling on market disaster or some other strategy.
Tough Year for Hedge Funds
Hedge funds have posted a drop of 8% year to date, with Susan Roberts, RG Niederhoffer Capital Management.
Groupon shares soar in public market debut
Groupon, the company that pioneered online group discounts, saw its stock soar nearly 50 percent in its public debut Friday, showing strong demand for an Internet company whose business model is considered unsustainable by some analysts.
Have you heard? Buy the dip
With the S&P 500 about to end its best month in almost 40 years, many would be happy to cash in gains and start packing for the ski slopes.
But some underperforming investors are being cornered into putting yet more money into U.S. stocks.
The S&P 500 on Friday closed its fourth week of gains and is up more than 13 percent in October alone. But many, including hedge funds, were caught wrong-footed by the rally.
Hedge funds, among the equity market's power players, are on average sitting on losses of 8 percent for the year according to Hedge Fund Research. Meanwhile, the S&P 500 is up for the year, if only a bit more than 2 percent.
Biggs Boosts Bullish Stock Bets
Barton Biggs, the hedge fund manager who bought stocks when the market bottomed in 2009, boosted bullish bets on equities in his Traxis Global Equity Macro Fund after European leaders took action to contain the debt crisis.
Investors remain too pessimistic, meaning the rally will continue as they change their mind, he said.
"There's a tremendous amount of money that's trapped out of stocks," Biggs said today. The rally is "going to continue for a while."
Biggs said that while he's not buying European stocks, he is drawn to their valuations.
"I must admit I don't own hardly any European stocks, but I'm intrigued by them because they are so cheap, and because it would certainly be a contrarian trade," he said.
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