What the heck is going on with the markets?

I have felt for sometime that "the market" doesn't behave like it used to, I couldn't quite put my finger on it but as a trader, I've felt that news and earnings and whatever just didn't seem to matter anymore or did it? Clearly the "market" is much more of a casino that it ever has been with computer programs overshadowing fundamentals (except that so many corporations are able to engineer their quarterly reports to "surprise or meet expectations" of analysts so as to make the fundamentals less important than years ago) and all you had to do to be successful was be a little ahead of the programs and you could ride each wave . . . . yes, figuring out what the computer programs are going to do isn't easy but that's where having a sense of tug and push or market wave action comes in, it isn't easy to develop this sense but many years ago I heard Ed Sakota (arguable one of the greatest traders in history) say that all you had to do was go down to the ocean and watch the waves come in and go out and you could learn about how markets go up and down . . . . it was the most important lesson I've ever learned in my trading education and I always love to go to the ocean and watch it do it's thing and remind my self that the randomness and flow of it is what I have to be aware of when trading . . . anyway, here is Bill Fleckenstein's (www.fleckensteincapital.com) comment from today . . . somewhat confirming what I've felt. I have been able to be in sync with the market (excuse me, computer programs) for sometime now.

C

Not Your Grandfather's Panic Liquidation Now I'd like to take a stab at making sense of the recent tanking of the stock market. To me, the decline of the last week or so has been different than any I've seen in my 30-year investment career -- in that it was led by the indices and not individual stocks.

When we have seen what looked like panic liquidation in the past (1987, 1990, 2000-2001, 2008, etc.), that always came nearer to the end in terms of time (though not price); and after stocks -- individually and collectively -- had been roughed up beforehand for quite some time, for very understandable reasons. One reason why I failed to see a decline of this magnitude coming: It did not evolve in a way that showed problems bubbling to the surface, but rather with the indices (and perhaps ETFs) leading the charge lower. This was like the '87 crash in reverse, whereby the panic in the indices happened first.

What I don't know is, what this decline means, whether stocks generically are now vulnerable to a wipeout, or that it's just indicative of the environment we're in -- with so many quants and hedge funds treating everything about the stock market like some kind of a trading sardine. (A derivation of today's electronic, quant-driven markets may be why the market doesn't seem to discount anything anymore, a point which I have made many times in the last 10 years.) It's not clear to me what may come next, other than that if stocks do get pounded from here, I am certain that more Fed liquidity will be forthcoming. (PS: Its balance sheet hit a new high this week, for those keeping score at home.)