Math--Not Middle East--Is Reason for Market Decline
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RECENT POSTSCurrent DateTime: 02:54:40 25 Feb 2011LinksList Documentid: 27913298Expiration DateTime: 2/25/2011 2:57:38 AMYour First Move For Friday February 25thPro Traders: QE2 Coming to an Abrupt End?Exclusive with AIG CEO Robert BenmoscheWeb Extra: Burned by Tata MotorsOptions Action: RussiaWorse Than We Think?Pops & Drops: Omnicare, Priceline...Call to the Floor: Sanderson FarmsFAST MONEY FEATURESFAST MONEY POLLGet in the post game. Respond to our "Question of the Day" right now.TRADE SCHOOLGrab a pencil because school is in session and the Fast Money traders are teaching class.FAST MONEY PODCASTSDownload Fast Money onto your MP3 Player.FAST MONEY WIDGETGrab this all-in-one application and get recaps of the show sent right to your desktop or blog.SHOP FOR FAST MONEY MERCHANDISEGet your game on with Fast Money gear.FAST MONEY PHOTOS!Check out our scrapbook. These "pix" are guaranteed winners.NEWSLETTERSign up and receive a daily email from the Fast Money team!FAST MONEY MOBILE ALERTSGet advanced information about the next Fast Money.setDefault('cnbc_textbody');Market Falling Because of Math, Not Middle EastPublished:
Thursday, 24 Feb 2011 | 4:28 PM ET Text Size By: John MelloyExecutive Producer, Fast Money
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While the turmoil in Middle East and subsequent rise in oil above $100 is a convenient excuse to give for the one-week equity selloff, the real catalyst may be nothing more than simple math, some traders say. It's what happens when a market devoid of fundamental analysis moves on momentum and a herd mentality.
Last Wednesday, the S&P 500 Index doubled from its bear market low of 666.79 in 2009. The 100 percent move to S&P 1333 was a much-ballyhooed milestone on trading floors and cited by pundits as reason to take profits. Sure enough, the S&P 500 hit an intraday high of 1344.07 two days later. The self-fulfilling herd had spoken."The S&P 500 bottomed 102 weeks ago and has since rallied 100 percent," wrote Jeff Saut, Raymond James investment strategist, in a note at the start of this week. "There have been only two other instances when that has happened, 1934 and 1937. Following the peaks of February 1934, and March 1937, the stock market corrected."
Saut said that's why he got cautious on the market, but not totally bearish, because he still likes the long-term fundamentals. He recommended clients sell 20 to 30 percent of their positions to raise cash.
Getting a little more sophisticated to account for all the quantitative traders out there, Societe Generale SCGLYloading...
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