Whenever the markets undergo a concussive correction as we are seeing right now it never seems at the time that what is happening is at all rational. Indeed one way in which we cope with these dislocative price moves is to seek out scapegoats.
Mark Mahorney at Stockblog.com notes how many observers are blaming hedge funds for the contraction in prices. Ticker Sense shows how this schizophrenia in the headlines of the mainstream media. Over at the Big Picture readers are already identifying who got this market right (and wrong). Despite what any one says in the media the markets will do what they want to do, when they want to do it.
Therefore should the magnitude of the move is frightening is it at all surprising? With the emerging markets and commodities leading on the way down the signs were already out there. Emerging market sentiment was seemingly frothy a month ago. In the realm of commodities a secular shift in investor demand for commodities has seemingly changed market dynamics. The point is not that they rang a bell a month ago, but every bull market sows the seeds of its own demise. Those seeds have now sprouted. In this light the market moves seem like a rational rotation.
A careful observation would say that it is indeed premature to call for an end to the equity market decline. Ticker Sense graphs the ratio of overbought to oversold stocks and finds room for a further decline despite the move to-date. No one really knows when and where the markets will find some firm ground upon which they will make their next move up. However investors can try and learn from this experience and hopefully make better decisions the next time around.