RevShark
Maybe It's the Hedgies
11/14/02 01:06 PM ET
Over on RealMoney Pro, Doug Kass is reporting that a number of sources are telling him that there are several very big hedge funds trying to break the S&P through key resistance areas such as the 900 level.
I have no idea if that is true, but it certainly does have that feel to it. I bet there are plenty of funds gunning to take the other side of that trade. Once someone knows your intention, it definitely helps to undermine what you are doing.
Caution: Wet Tape
11/14/02 01:50 PM ET
I received a lot of mail about my prior post -- let me clarify a bit. The S&P 500 has some very important technical levels at 900 to 905. Many shorts have stops set at those levels.
According to Doug Kass, there are some big hedge funds that are long that are attempting to break the S&P through those resistance levels. Remember, tomorrow is option expiration, so these funds may be heavily long call options.
The goal is to cause a short squeeze that brings in more buyers and causes a further squeeze, which brings in more buyers, and so on. If it works, the fund can dump its positions much higher for a nice profit. Basically they are trying to "paint the tape" to draw in buyers so they can sell their calls prior to expiration.
I don't know how much firepower a fund like this might have, but when everyone knows what they are attempting to do, it makes it a bit harder.
This is all supposition, but it makes sense, especially as I look through individual stock charts.
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