First, Europe. American investors have been putting positions into the Euro markets for some time to avoid reg. T guidelines.
Second, the Yen carry is unraveling as risk positions are paired (and we see the effects of the reduced positions in short-term yields as per the previous post). Asia is melting down at the moment and fear of contagion is everywhere.
Both of these circumstances levered up positions put on by American Hedge Funds, and the funding requirements they face now are all over the press.
Rumors abound regarding several Hedge Funds who are in trouble...and for my part, I hope that a certain fund manager in CT can make it through this tumultuous period, as he is most assuredly massively short vol.
The decline should be orderly... and we should end up at 1320 or so as I stated last year. the August Fed meeting awaits as a last hope for those who are long, but Bernanke, notwhithstanding the eurodollar market (which is pricing in one, possibly two cuts) will not budge unless ENERGY decreases. Oil controls everything right now.