Interest rate futures had there single biggest range day since 1987 yesterday as another component on the capitulation check list was marked off. Big 3 negotiations have been kicked down the road but some sort of re-balancing with design performance mandates will be put into place before or shortly after the new administration takes office. Hedge funds, a major contributor to the high days in stocks, are now down to a mere 17% exposure to stocks according to Bloomberg.
Connecting these huge daily trading ranges is the topographical feature of an expanded bottoming process. Filling in the bottom is made more interesting by the lack of any clear vision as to a national recovery plan especially since the Treasury and Fed have been anything but transparent so far to date. The Obama folks as of yet have not tipped their hand in a strategy, probably reasoning there is little to be gained from presenting a plan that they are powerless to enforce.
So by and far the key market participants are adjusting by liquidation and trying to figure out how to get into the G's pants. Insurance companies have developed a plan to buy small banks to enable them to qualify for Tarp or in-kind funds. Hedge funds as mentioned are cashing up by liquidating not only stocks but by eliminating giant positions in commodities which accounted for the vast majority of the idiocy play called developing world demand.
