Monday, June 30, 2008

What to Make of This Selloff

Although fundamentals have looked more bleak lately, and oil prices are squeezing the economy, last weeks sell off wasn't triggered by a whole lot of news. I'm attributing it to funds dumping stocks at the end of the quarter. They have to deal with people pulling their money out, and are preparing for it. Also, many hedge funds only allow redemptions twice per year. Once at the end of the year, and once (you guessed it) at mid year. I'm not saying this is the only reason for the tough sledding, but it could be a factor. The volatility index isn't nearly as low as in March, and volume has been lighter. I think end of quarter fund selling can be attributed. This could be a reason for stocks to rally in the upcoming weeks as we start Q3. Let's be optimistic!

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