Farrell: Maybe The Hedge Funds Have Sold Enough

The market did its thing on Tuesday. Hewlett-Packard started the day off well with a good earnings report and, even better, a pretty good outlook for the future. Selling came in later in the day, and it looked like the October lows were going to be a distant memory.

But things turned in the last hour: the market finished with a nice gain and the S&P closed at 859. That's not too far from the October intraday low of 840. And that intraday low was breached on November 13 when the market fell intraday to 818, but turned and closed well above that level and above the 840 level as well that day.

So what gives? It could be the fear late afternoon has engendered for months now is not being met by selling pressure. November 15 was the date for notifying your hedge fund if you wanted out at the end of the year. Hedge fund guys are as smart as any group around, and it seems they were selling well in advance of that date so as not to get caught when the door closed.

A report making the rounds today detailed managers' Form 13F filings. This report shows what managers own. Their holdings of U.S. stocks by and large plummeted. The decline in the size of the positions could be from market share losses or the sale of a position or, most likely, both.

Atticus Capital reduced its holdings from $8.1 billion to $510 million. Tudor Investment from $5.7 billion to $453 million. SAC Capital Advisors said its holdings of U.S-based stocks (and options and converts) were $7.7 billion versus $14.4 billion last quarter. Moore Capital said the "value of its 13F securities fell 69% to $1.4 billion." And on and on.

Maybe they sold enough, or maybe (and be still, my beating heart, at the thought of this!), they need to put some money back to work! I wouldn't bet on anything. And, as I have said, a bottom is a process, not an event. Well, we are having quite a process.

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