This blog post originally appeared on RealMoney Silver on Oct. 7 at 7:33 a.m. EDT.The following observation is a thin-reed one and admittedly non-rigorous, but it might be more important than a lot of my fancy analysis and logic. For what it is worth, this is what I have been seeing in the last week -- and, quite frankly, it makes me more optimistic. As readers know, a constant theme of mine has been that the vortex (and continued supply) of selling from the hedge fund liquidations would serve as a significant headwind to any meaningful market advance. Beginning last Monday, I began to see a number of big hedge funds in the S&P 500 futures pit, boldly selling futures to hedge their core long holdings. As the market dropped precipitously on both Friday afternoon and Monday afternoon, they got ever more aggressive -- according to my sources, more aggressive today than at almost any point in a decade or more. If my observation is correct -- and we will get some sense of this on Friday afternoon when the size of the professionally hedged S&P futures positions are released; our thesis will be proven correct if there is a large increase in open interest -- it will be proof positive that those hedge funds are now shorting the hell out of S&P futures in order to hedge their cratering longs. Indeed, some of those hedge funds might now even be overhedged and short S&P futures, as it has been working. This strategy is a classic tactic one sees at panic/capitulation lows as hedge-hoggers sell short what they can sell easily -- the S&P futures market is deep and liquid -- while they retain what they can't sell easily (i.e., large blocks of individual equities).