The S&P futures are currently pointing to a 62 point drop around the opening, or a 4.7% decline. Now things could change before the opening. But, here’s something to keep in mind. Prior to whatever happens tomorrow, the S&P is down 9.7% so far in January, and down 6.7% in the last 6 trading sessions. These are off-the-charts outliers for any period, much less the January of an election year. So, you’ve had a bunch of quants at the big hedge funds sitting back saying, “We’ve gotta get long because what we’ve seen so far this year is EXTREMELY unlikely from a statistical standpoint, so we’re due for a HUGE bounce.” And of course it’s leveraged money. So if that bounce doesn’t materialize tomorrow, and in fact we get a wipeout, I predict continued problems for the rest of the week as the hedge funds have to unwind these poorly timed long positions to meet margin calls. Selling will beget selling.
Again, maybe Uncle Ben will show up with treats for the children. But if he doesn’t… look out below.
