10/5/11…like TB said

TB’s Quote of the Day: “the market will move in the direction which causes the most people the most pain.” Old saw.

Volume surged by 1B shares to 6.9B shares in a whipsaw session that “may” have been a ‘selling climax’ but one thing casts doubts on that: we did not clear the prior day’s high making a ‘dead cat bounce’ a more likely scenario…but given the magnitude of the selloff and the volume at the end of the session either alternative is plausible. NYSE stocks executed on the Big Board however DECLINED from 1.4B to 1.3B shares – ‘is this the new normal.’ It crossed 1B an hour before the close, but despite the huge upswing only traded 100M shares in the final three minutes…hmmm, balancing positions? Short covering? Advance/Declines were positive but compare: +1.5:1 va -10:1 vs -3.9:1 on NYSE and +2.7:1 vs -10:1 vs -3.4:1 on Nasdaq. Breadth was positive, but again, compare: +5.7x vs -30x vs -16x on NYSE and +8.7x vs -10x vs -9.2x on Nasdaq! New 52 week highs DECLINED to 17 vs 23 while new lows hit an amazing new high of 2102 vs 1595, lending credence to the ‘selling climax’ theory. The VIX meanwhile hit 46.88 before retreating to 40 and closing at 40.82 -4.63.


Here are the results: Dow +1.4% vs -2.4% vs -2.2%; Transports +4.4%! vs -3.6% vs -3.5%; S&P 500 +2.3% vs -2.9% vs -2.5%; Nasdaq Composite +3.0% vs -2.9% vs -2.6%; 100 +2.1% vs -2.5% vs -2.7%; Russell 2000 +6.5%!!! vs -5.4%!!! vs -2.8%%; NYSE Financials +3.1% vs -4.4%! vs -3.6%. Note the volatility in the Russell 2000 and that all indices remain net negative over the past three volatile sessions. We have now had a HUGE down day, followed by two whipsaw days, the latter possibly ending the selloff??? Overnight markets are up but ask yourself why we keep thinking that the Euro/Greek/US crisis has been solved? Delusional!


European stocks are up after being hammered for five straight sessions while Asia continues to slump for a sixth: FTSE +1.9% vs -3.4%! vs -1.7% vs -1.3% vs -0.7% vs -0.2%; CAC 40 +2.9% vs -3.2% vs -2.3% vs -1.8% vs -0.1% vs +0.1%; DAX +3.5% vs -4.1%! vs -2.8% vs -2.5% vs -0.4% vs +0.1%; Nikkei -0.9% vs -1.1% vs -1.8% vs flat vs +1% vs +0.1%; Hang Seng closed -3.4%! vs -4.4%!!! vs -2.3% vs closed vs -0.7%; Korean KOSPI -2.3% vs -3.6% vs closed vs flat vs +2.7%!!! vs -0.7%; Indian Sensex -0.5% vs -1.8% vs -1.8% vs -1.5% vs +1.5% vs -0.5%. US futures modestly up: DOW +46; SPX +6; NDQ +10. Bonds weaker after also being whipsawed yesterday. Currently 10 yr is 1.84% -5/32, after a RECORD low 9/23 of 1.6855%; 30 yr 2.83% =9/16.


Gold held above $1600 for a third day but closed weaker($1616 -$41.70), and is off slightly overnight, following 9/23’s low of $1534, lowest since 7/6!), $1614.40 -$1.60. Last Monday’s low was nearly to the 200 day, $1527.20, now critical support. We negated the spike to $1923.70, a buying climax on 9/6, but could make another run for the roses. Crude did NOT benefit from the rise in stocks closing at $75.67 -$1.85, lowest since 9/23/10 as was low of $74.95!. Overnight we are up slightly to $77.82 -$2.15.

…sometimes things just don’t work out the way you think. Let’s go back to last Tuesday, the final day for T+3 settlement for the quarter. TB noted that after that day the hedge funds could trade with impunity as it wouldn’t effect their quarterly returns – if they wished. Here is what happened:

9/27 – market rallied on above average volume on ETN’s but lower on the NYSE. S&P +1.1%, Dow +1.3% and while a/d and breadth were positive, new highs/lows were 38/119 not a good sign. Hedge fund position squaring?

9/28 – Market sold off about 2% across the board but most notably the Russell 2000 which had been the leaders on Tuesday was worst performer (-4.2% vs +2.2%). In sectors, NYSE Financials were -2.6% vs +5.1% setting off a bloodbath to follow

9/29 – a mixed bag with Dow +1.3% and S&P +0.8% but BOTH Nasdaq indices declined, -0.4% and -1.0% respectively. Both the Russell and NYSE Financials rallied +1.7% and +2.9% respectively

9/30 – it was down and downer. Dow -2.2%, S&P -2.5%. Russell -2.8%, NYSE Financials -3.6%! An ugly end to an ugly quarter which took the entire year with it.

10/3 – Another down day: started down headed up, held for two hours then plunged on big volume. Dow -2.4%; S&P -2.9%; Russell -5.4%!!!; Financials -4.4%!!!

10/4 – A down day until news of yet another solution to the Euro crisis (pullease!!!), then a momentous rally on strong volume (ETN’s, NOT NYSE trades!). This would have been a ‘selling climax’ EXCEPT we did not get anywhere Monday’s high creating a possible ‘dead cat bounce’ and that COULD mean more downside, and if so MAJOR.

Overnight, Europe rallied but only for the first time in six sessions and a heavy net negative to them. Meanwhile Asia was weak for a sixth session (Hang Seng closed), and while U.S. stock futures are up, only modestly, Dow +24, SPX ++3.50; NDQ +5. In other words, anything can happen and don’t get whipsawed today. The trend is still solidly down! Gold is holding above $1,600 and Crude remains weak. Most concerning if you believe in this economy is that Transports continue to be the worst sector along with small caps and financials…all are down more than 22%. Can economy be strong if transportation is weak? Ytd Transports are -17%+ and for the 12 months -7%+. Think!

Market just opened…so much for the slight improvement in futures overnight…market is opening to the downside: Dow -58. S&P -8; NDQ -15…8 minutes after open!

. . .  – – –  . . .    . . .  – – –  . . .

Watched conclusion of Ken Burns’ Prohibition, and it may well have been his best documentary yet. At least from the prospective of teaching us lessons on what not to do which we currently are doing. Basing laws, and worse constitutional amendments on ideology is worse than stupid.


Did you know that prior to prohibition, 70% of federal revenue came from alcohol sales? Did you know that that, under the guise of paying off WWI debt was the reason the income tax came to be?

So to all of you who believe in the goals of the tea party, remember that those goals are only to serve the ones of the now discredited Koch brothers. Remember the wealthy suffered the least during the Great Depression and yet broke the law…organized crime grew and continued to grow after the repeal of prohibition. Isn’t it a shame that it took the 21st Amendment to take out the 18th Amendment, couldn’t we have just erased that shameful act? Note also that those voting for prohibition were led to believe that beer and wine would be excluded due to their low alcohol content. Then it was radically changed to cover all alcohol. At first people tried to respect it (although the vast majority of Congress continued to drink!), but then when they saw the corruption, they ignored the law, bringing on far more moral decay than before its passage…scofflaws!


That is why TB votes NO on most referendums, amendments, etc. Our elected officials cause enough pain without us making it worse.


Looks like a great day here…hope it is for you.




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