On the one hand, I was mystified that the stock market was up in the morning session given that the money market seize up was not at all improved and several key measures had worsened overnight. I was wiling to accept the view that we might have an oversold bounce and saw several bloggers indicate they had gone long in the last three days. But even with my bearish predisposition, given that the mess in the debt markets is now starting to engulf the real economy, I am still perplexed with the pattern of the last two days, with a plus 350 point end of session fall yesterday, and a roughly 600 point plunge today in the final hour.
I’ve long said that end-of-day market reports are silly, since the only thing reporters can normally say with any confidence is “the market moved and we don’t know why”. But what we’re seeing right now isn’t moves so much as fully-fledged earthquakes. Even during a bear market, you don’t expect three 700-point down days to come in quick succession like this: if anything, you expect big one-day rallies, followed by more grinding-yet-inexorable decline. The big one-day plunges happen at the top of bull markets, when bubbles burst. But we were already down 35% when the market opened today. Now we’re down 42%. Whatever that might be, it sure ain’t a bull market.
I think the hedge funds are blowing up myself.