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Thursday, November 13, 2008

Will Hedge Fund Redemptions Sink the Market Lower?

Two weeks ago, I discussed about the positive divergence in SPY chart. I said that we could be looking at a more sustainable rally in the bear market. Indeed, we managed to sustain the rally for about 1 week. We never have one for more than 3 days in a long long time. I also caution about resistance at 100 level. The SPDR Trust (AMEX:SPY) turned down from there and we are now close to retesting the Oct's low. If we do break these lows, next level of support would come in around 75. See monthly 10 year chart below.

Are the selling these few days related to hedge fund redemptions? According to a slightly dated article from MarketWatch:

"Many hedge fund investors can withdraw money on Dec. 31. Some funds require that redemption requests be submitted 90 days ahead of time. That means requests have to be in by Tuesday. Other funds require 45 days notice, so there may be another round of withdrawal requests toward the middle of November."

Here's a recent one talking about Nov 15 (this sat) being the hedge fund redemption deadline


Anonymous Anonymous said...

As I understand, the Nov 15 deadline is only for clients to give notice of their intent to withdraw funds. Trade execution deadline is unclear, and does not mean that selling will be done by this date, since the funds can sell after the notice has been provided. Moreover, I dont think there is any way to know in the aggregate the volume of selling requests that come in by this date. So my take is, uncertainty
will continue to loom after Nov. 15.

11:24 PM  

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