Coming Week: Month's Ending, Volatility Isn't

October has been a spectacularly terrible month for traders to endure. Although the month comes to a close next week, investors probably won't get much relief from the market's extreme volatility.

Many traders likely can't wait for October to end. Thus far this month, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite have all fallen more than 20%. Though investors and market analysts typically look forward to the close of a month, they know the volatility probably isn't going to vanish after Halloween.

"When the month ends, what difference does it make?" asks Paul Mendelsohn, chief investment strategist with Windham Financial. "You still have the same economic problems. You're just in November. I do not buy that we're going to bottom in October because historically that's been the case. It's clearly different now."

Much of the volatility has been blamed on the liquidation of assets due to the deleveraging of hedge funds and mutual funds. Heading into last week, many analysts had hoped the indiscriminate selling would end.

However, nothing has changed, as this past week proved. Mendelsohn notes that bank loans and credit lines are being pulled on hedge funds and that investors are redeeming while the funds grapple with the tough task of deleveraging. In the coming week, analysts believe many of these funds will continue to search for a reason to buy, but may come up empty.

"The funds don't know how much cash they're going to have to use, so why buy something today if the market is going to go down?" Mendelsohn asks. "You've got all sorts of dynamics that lead me to the conclusion this puzzle is going to take longer to figure out. Just because it's the end of October, that doesn't change a thing."