Maybe this is the thing to do in May — back in May of 2005 I had a post titled “Blame it on the Hedge Funds?” I wrote that after seeing a parade on people on CNBC speculating that some hedge fund(s) had blown up and that was to blame for the market’s woes at that time. Jump to this year and check out what was written in yesterday’s Worden Report:

I’ve never seen anything like this degree of vacillation in the market. Take the behavior of the Russell-3000 for the last five market days (today included). Each day was not just strong or weak — but VERY strong or weak.

Today was very strong with over 2000 advances, yesterday was very weak with over 2000 declines, the day before that was very weak with over 2000 declines, the day before that was very strong with over 2000 advances, the day before that was very weak with over 2000 declines.

This is exceedingly unusual behavior. One thing is to seesaw back and forth. It is quite a different thing to repeatedly jump from one extreme to another. It is something new in market behavior. I’m not sure what it means or what causes it. I suppose it may have something to do with hedge funds and private equity. It is almost certainly a sign of instability in the market.

Today all eight Important Averages were decisively up, in contrast to yesterday when all eight were decisively down.

Today all 17 of our breadth groupings were Decisively Up, in contrast to yesterday when only two were positive, the other 15 being Decisively Down.

So today was a strong day, strong enough to establish some upside momentum. But we can’t have confidence that momentum will carry through — not in view of recent market behavior…

That kind of vacillation does indicate some skittish herd mentality. I’d bet it’s more than just the hedgies & private equity dudes who make up that herd though. I doubt that we’ll ever know who was behind these moves so I’ll just focus on trying to figure out what it means and what comes next. Just from the sound of it, and given that volume’s been higher on the down days, I’d say that there’s some professional distribution taking place.