J. Christoph Amberger says investors should brace themselves for more market volatility in the coming months. Institutional investors like hedge funds are using every rally to liquidate more assets and take short-term profits off the table.

More from Today’s Financial News:

Markets are in violent flux. Double digit drops are followed by enormous gains. Why?  Simple: Hedge funds use every up to liquidate assets, driving prices down after every upward surge.

How long will this last? Watch the video here

The predecessors of TFN used to have a service called Extreme Volatility Speculator. They closed it down a few years ago because the words Extreme Volatility were scaring off potential customers.

How times have changed. These days, it’s no longer penny stocks, microcaps and special situations that would qualify for violent moves upward or downward.

We’re getting used to increases of 700, 800, almost 900 points in a day followed by 5, 7 or even 10% drops in the market. It’s not just emerging markets indexes. It’s staid, solid behemoths like the Nikkei, Hong Kong’s Hang Seng, and the Dow Jones Industrial Average.

In fact, some of the most volatile speculative stocks today used to be called value stock just a year ago.

Can we expect the markets to calm down any time soon?

Don’t count on it in the short term.

Hedge funds are still unraveling huge asset positions. Investors want their money back before they’ve lost more of their principal, or before new social empathy legislation punishes profitable investing with increased capital gains taxes.

Until December 31, be aware that every upward surge in the market will cause profit taking and selling…

And get prepared for a dark, dull period of subdued expectation in the first two quarters of 2009… and investors try to figure out when exactly the new Administration will drop the axe on investing as we know it.

Source: Expect Maximum Market Volatility