Yesterday’s 40 minute 600 point swing was rumored to be driven by the Vampire Squid (GS) buying emini futures on their expectation of QE3.
Today’s action shows that you can only prop up/drive/manipulate markets so far before they collapse under their own weight.
S&P500 expectations of $94 for 2012 at a 15 multiple gives us a prior price target of $1400 on the SPX. If that falls only $10 to $84, and the multiple contracts to 12, we are at 1020. And if we really get whacked, and earnings drop to $75 at a 10 P/E, well, you can do the math.
Don’t blame me, I am not traveling today.