Thursday, May 20, 2010

Mutual Funds VS Hedge Funds Whose More Active Today; $SPY

Desk Color – all eyes are on the macro – trades being led around by every headline out of Europe and Washington.  The cash desk was on the quiet side.  MFs are more active vs. HFs, although a lot of the trading has been dollar neutral and very hedged (i.e. some picking away at top ideas on the long side but hedged away w/a macro short of some sort).  A lot of pairs trades, which signals cash levels aren’t great in the fund complex.  We are still seeing sellers and shorts, despite the sell-off.  The weakness has been pretty orderly on the cash desk (i.e. while VIX spiking as downside protection bought, cash more quiet….a lot of people watching prices dip lower instead of panicking to liquidate positions).  There is nearly 0 interest in company specific news/earnings, etc – the macro is dominating.  The 1065 May 6 intra-day low looms just 1.8% below here and many are waiting to see how a revisit to that level is handled.  That said, the pain trade at the moment would be a sharp spike to the upside (i.e. similar to what we saw in the euro, which has ripped ~4% higher in the last 48 hrs @ the peak at 1.26 today as sentiment had become just too negative). 

Remember This is a Ponzi Scheme- Who ever puts money in first is usually the one walking away with your retirement fund or brokerage account. Truth Hurts

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