Expect extreme unidirectional movements and volatility in every market – hedge funds, pension funds, and private equity making markets a battle ground
Susan Hicks
Jul. 20, 2007

Traders from the floor and the electronic clearance systems report massive blocks of trades in one direction and then in another direction. The clearinghouses face a massive challenge but at the end the markets are extremely volatile. But what is different in today’s market is the fact that large – very large amounts of money are capable to move markets in one direction day after day without little corrections.

Take the example how crude oil moved from 66 to 76. Between 66 and 69 there was extremely volatile sessions. In one hour the market was up 1.5 and the next few hours it was down 1.0. This crazy volatility continued for couple of weeks and after that the oil market took off and never looked back.

Expect extreme unidirectional movements and volatility in every market. This reason is simple. The hedge funds, the pension funds, and private equity making markets a battleground. The big money slowly and steadily bought the oil futures in the last two weeks. Now, in India Daily we predicted correctly that boil will move from 66 to 78. But we saw something interesting. After reaching 71, the oil market did not consolidate. The same has happened in corn on the downside, wheat on the upside, and the list goes on.

The actual use and big money speculators perhaps dominate the market. If only a few people are sitting and accumulating based on analytical models, how will the correction happen.

Watch and see – oil will make a new high or test the old high at 78 and again fall back to a substantially lower level. But the move downward will be unidirectional with little correction between the start and end of the wave.

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