Markets have reversed, from up over 115 on the Dow to flat to down 50. There’s still 90 minutes to go until the close, so anything can happen.

A couple of likely suspects as to the cause:

-Crude Oil Rises
Above $83 After Unexpected U.S. Inventory Drop
(Bloomberg)

-JPMorgan revises downwards estimates of Chinese high flyer BIDU evenue (WSJ MarketBeat)

-Big firm downgrade on Tech sector

-ECB governor Weber stated that the ECB may need to raise rates to a "restrictive"
level (Briefing)

Sentiment has gotten somewhat bulIlish, and I’m not so sure any of these things are the root cause — or will stick — but thats what I have been hearing . . .

>

UPDATE:  October 12, 5:23am

Here’s a chart showing Baidu leading the stock S&P 500 Index lower on Thursday:

Bidu_spx_1011

Chart courtesy of M. Ramsey King Securities, Inc.   

Category: Energy, Markets, Psychology, Technology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

60 Responses to “Intraday Reversal”

  1. Brian B. says:

    Dow looses 100 pts in 20 mins… hhhmmm you think there are some nervous people out there? Now was that just a real nice stop run or a sign of things to come? Only time will tell…this was a GREAT day for me.. but I only day trade, so either way I dont really care, except down is always nicer, Fear must be a stronger motivator than greed.

  2. SPECTRE of Deflation says:

    LOL! Let me tell you what hasn’t reversed. GOLD AND SILVER. I’m gonna buy some designer glasses because the PM’s are shining so brightly.

    Watch the cards folks…it’s really easy. You folks from out of town? Step up to a can’t lose game of 5 card Monty.

  3. peter from oz says:

    thanks for quick feedback
    appreciate a considered summary at days end
    rgds pcm

  4. Marcus Aurelius says:

    The chart looks like it walked off a cliff. Watch out for that last step – it’s a doozy.

  5. MarkTX says:

    BIDU dropped $55 a share from its high of the day.

  6. SPECTRE of Deflation says:

    The President is signalling he’s ready for a fight with Democrats concerning tax rates. He ain’t doing a “read my lips” moment. How can the Democrats save EVERYBODY if they don’t tax the living shit out of everyone making better than 40K a year?

    THE PRESIDENT: Just had a meeting with members of my economic team — and I thank you all for coming. I particularly want to thank Director of the OMB Jim Nussle for his briefing on the newest numbers regarding our deficit.
    You know, last February, it was projected that our deficit would be $244 billion , and today the Director informed us that the deficit — actual deficit is $163 billion . In other words, as a result of the hard work of the American people, this economy is growing; the growing economy has yielded more tax revenues than anticipated. And because of fiscal restraint, those tax revenues went to reduce our deficit.
    The deficit today is at 1.2 percent of GDP, which is lower than the average of the last 40 years. In other words, we have told the American people that by keeping taxes low we can grow the economy, and by working with Congress to set priorities we can be fiscally responsible and we can head toward balance. And that’s exactly where we’re headed.
    Now the fundamental question is whether the United States Congress will work constructively with the administration to keep taxes low and to keep spending sound. I look forward to working with members of both parties to continue keeping this — keeping our fiscal house in order, to continue to head for a balanced budget. But it’s going to require the Congress to show fiscal restraint, fiscal discipline. One of the reasons why the Constitution wisely gave the President the veto is to help them exercise fiscal discipline and fiscal constraint.
    It’s very important for Congress to also understand that they should not be trying to take money out of the pockets of the small business owners and working people. One of the reasons why this economy is robust is because taxes are low. And in order to keep — make sure that this economy grows we’ve got to keep them low. After all, people are working here in America. We’ve had 49 consecutive months of uninterrupted job growth, which is a record. And we intend to keep breaking that record by good fiscal policy here in Washington, D.C .
    I want to thank you all for your briefing. Thanks for coming by.

    END 1:07 P.M. EDT

    Source: White House Press Office

  7. Sue says:

    I think a hedge fund exploded. But I like conspiracy theories.

  8. MarkTX says:

    oops…BIDU only dropped $45.

  9. Marcus Aurelius says:

    “One of the reasons why this economy is robust is because taxes are low…”

    …and the other is that we borrowed a Trillion bucks from the Chinese and Japanese.

    We’re broke, unemployed, and fighting with the neighbors, but it’s okay, ’cause we still got us some credit cards.

    Sheesh.

  10. whipsaw says:

    I bailed on all of my calls (generally a reliable buy signal) when the Naz got ugly, but I couldn’t see a good reason to not book 21% profit on three week trades. I’ll let it bounce around until the fed meeting, then look to get back in if things go as I suspect they will, but got to keep one eye on the door.

    ==whipsaw==

  11. dark1p says:

    Looks like one of two things.

    1) A major geopolitical event, which we haven’t heard about so likely isn’t the cause.

    2) Somebody’s quant box got the ball rolling and a lot of other computers instantly flipped to sell.

    ‘A Demon of Our Own Design’, or something like that.

  12. michael schumacher says:

    I’m sure it will be “profit taking” and the real reason for the swoon won’t be known until “they” want us to know.

    Seriously it’s most likely the start of the two week “crisis” so that the Fed will have no choice but to lower rates.

    Seen this movie before….

    Ciao
    MS

  13. SPECTRE of Deflation says:

    One of the reasons why this economy is robust is because taxes are low…”

    …and the other is that we borrowed a Trillion bucks from the Chinese and Japanese.

    We’re broke, unemployed, and fighting with the neighbors, but it’s okay, ’cause we still got us some credit cards.

    Sheesh.

    Posted by: Marcus Aurelius | Oct 11, 2007 3:07:37 PM

    Keep that quiet please. The fleecing of the middle and lower classes isn’t quite complete yet. Calling Mr. Prince, Calling Tangelo, Calling BenDover.

  14. Donny says:

    Dow now down 113.

    I suspected the sell off was coming, but not intra day. WOW!

  15. Marcus Aurelius says:

    Still dropping like a freekin’ rock. This could get interesting.

  16. michael schumacher says:

    This is likely scenario # 2 from dark1p

    All artificially created so that they get another rate cut.

    Old movie….been done before.

    Ciao
    MS

  17. Florida says:

    It was real curious when it started to reverse. I just sat back for a moment and watched it slide.

    Just after it went negative for the day, it broke back for a moment or two and then the bottom fell out.

  18. Marcus Aurelius says:

    “All artificially created so that they get another rate cut.

    Posted by: michael schumacher | Oct 11, 2007 3:27:03 PM

    ___________________________

    Looks like a stampede, to me. Hard to control that.

  19. SINGER says:

    going back to that thread last week…

    SUCKERS RALLY

  20. SPECTRE of Deflation says:

    Black boxes are your friend. NOT!

  21. Fred says:

    SELLSELLSELL

    lol

  22. anon says:

    Ya think that maybe someone took a closer look at the retail sales data and realized that notwithstanding the rosy spin from the tout-TV talking heads (I heard one of their bimbos announcing that, wow, shopping center sales were up 1.7% from last year – no context), they sucked big time and indicated that perhaps some of the recent optimism was misplaced? That maybe ole Prof Roubini is more on the money?

  23. michael schumacher says:

    as dark1p already stated it does’nt take much to get the herd going one way or the other. We had a rally of over 100 pts this morning on higher food costs and lower labor costs (thanks Wal-Mart)…..just goes to show you that it works both ways…..we just do not know when

    Once one quant strategy starts selling…the rest join in……..but that’s also another movie we’ve seen before.

    Ciao
    MS

    And it’s never there fault too……..

    Ciao
    MS

  24. Josh says:

    AAII investor index went to 68% bull/bear, which always leads to a lower DJIA.

    Even though we slightly broke through old highs (intra-day), is this a double top on the S&P since it didn’t hold?

  25. Globalized says:

    Don’t they usually orchestrate one scary down day the week before options expiration in order to sell some short term premium, pick up some cheap calls and then pump it back up and cash in the following week?

    Still, that volume after 2:00 is pretty impressive.

  26. Fred says:

    Globalized paid attention in class.

    Well done A+

  27. bigFatMary says:

    trader take:

    mkt hit 15 min fib price extension and 15 min fib timing for a high while indexs were putting in a sideways pattern. a little push to the downside and whoosh!

  28. michael schumacher says:

    sure Fred……and you are all over this too!!

    Nice try..

    Ciao
    MS

  29. Florida says:

    Nice action in the VIX contracts today.

  30. rt says:

    Enough with the “Ciao, MS” already. Christ.

  31. SPECTRE of Deflation says:

    Enough with the “Ciao, MS” already. Christ.

    Posted by: rt | Oct 11, 2007 4:00:25 PM

    rt…that’s the best ya got, and you are bitching concerning someone else? LOL!

  32. rt says:

    Just find it pompous and annoying.

    Ciao,

    rt

  33. Bob A says:

    and moody’s downgrades 28b of subprime debt

  34. SPECTRE of Deflation says:

    Just find it pompous and annoying.

    Ciao,

    rt

    Posted by: rt | Oct 11, 2007 4:11:36 PM

    Back at ya!

    Git er done, [didn't want to sound pompous]

    SPECTRE

  35. SPECTRE of Deflation says:

    Don’t they usually orchestrate one scary down day the week before options expiration in order to sell some short term premium, pick up some cheap calls and then pump it back up and cash in the following week?

    Still, that volume after 2:00 is pretty impressive.

    Posted by: Globalized | Oct 11, 2007 3:43:39 PM

    If trading were that easy, not a damn one of us would be on this board. No disparagement towards Barry’s great site, but sipping boat drinks on a sunny and warm island and listening to Buffett [not Warren] sounds better.

  36. Eric says:

    Those of you who’ve read “Inside The Investors Brain” will not be surprised that the reversal in the market perfectly coincided with it starting to rain in New York…

  37. Globalized says:

    Spectre,

    Never the less, that scenario seems to play out on schedule nearly every month.

    Never said trading was easy. How easy do you think it would be for the average retail trader, not in the “insider’s club”, to go long into today’s tankage? Did you?

    Anyway, let’s see if we’re above today’s high next Friday.

  38. Justin says:

    What about the jump in umport prices? FED Fucked Up, by raising rates…BIG TIME!

  39. Justin says:

    by lowering rates…lol

  40. Winston Munn says:

    Globlized wrote: “Never said trading was easy. How easy do you think it would be for the average retail trader, not in the “insider’s club”, to go long into today’s tankage? Did you?”

    Although you didn’t ask, I confess that I did not buy into today’s tankage, but instead sold short a couple of NASDAQ chipmakers into Monday’s rise. I added to the positions into Tuesday’s rise, and completed the positions this A.M.

    To be completely honest, neither stock showed any strength during the strong days, with neither breaking smartly back up through its 50-day moving average on bounces, so it wasn’t like I was shooting crap or something, and both were classified in my perception as companies with bad forward-looking 10Qsand/or10Ks.

    Of course, I also know its foolhardy to try to short a bull market, but my judgement tells me that “Something Wicked This Way Comes.” Although it could be my bias, it looks to me as though there have been quite a few days during this 4-week rally with a lot of churning, which I have tempted myself into judging were days of distribution.

    If that judgement proves correct, these markets should start rolling over soon.

    Time will tell.

  41. ferd mertz says:

    exhaustion!

  42. Winston Munn says:

    Gesundheit!

  43. whipsaw says:

    Winston Munn said:
    Of course, I also know its foolhardy to try to short a bull market, but my judgement tells me that “Something Wicked This Way Comes.” Although it could be my bias, it looks to me as though there have been quite a few days during this 4-week rally with a lot of churning, which I have tempted myself into judging were days of distribution.

    If that judgement proves correct, these markets should start rolling over soon.

    Time will tell.

    I give you credit for finding some chippers to short, but in a rising market that strikes me as a) too much work vs. just riding the wave and b) too risky because of creatures like Mr. Merger showing up from nowhere (been there, very sad). I prefer to work the index and sector ETFs whether short or long which in my view trades off some potential performance but reduces the risk of betting for or against a single company.

    I don’t know whether we’ll see markets rolling over anytime soon, but would note that today’s performance isn’t much of a tell. Large cap tech took the big hit, but if we use QQQQ as a proxy, you’ll notice that unless you bought since last Thursday, any recent buyer still has a profit (in some cases astounding profit if you were using calls). Blowing the gains of a week in a single day is not remarkable and QQQQ needs a rest in any case.

    I keep hearing that money is rotating now from tech into financials and into the rotting corpse of the homebuilders- indeed I thought I saw the corpse move a little today. If the bankers and brokers get any wind behind them, then $SPX 1700 by year end is not out of the question.

    But as you say, time will tell.

    ==whipsaw==

  44. Larry says:

    I expected this next week during OEW but it surprised me also.I bailed on Monday at the close and I suspect that earnings will be the deciding factor. I’ll see you all at SPY 1300 very soon

  45. Globalized says:

    Winston,

    Good luck with your semi shorts. Could work out since Nasdaq’s pretty overbought here and semis do seem to be underperforming (relative to other tech). My only (unsolicited) advice would be don’t get shaken out before next Friday. If there’s a downdraft coming, I suspect it won’t happen til after expiration – like last July.

    Lest I give you the impression that I’m generally bullish here, the only thing I’m still long at this point is XLP – which was actually up today.

    Besides, the intent of my original comment was not really to make a market call so much as to express my cynical view that today’s financial markets are orchestrated (as opposed to “free”). So, like Whipsaw, I’m not inclined to test the short side yet.

  46. Aaron says:

    The amount of volume that came along with the intraday reversal is what makes me think there is some real downside risk to this market in the short run. The QQQQ traded more than double the daily volume it has been trading recently.

  47. whipsaw says:

    Globalized said:
    Besides, the intent of my original comment was not really to make a market call so much as to express my cynical view that today’s financial markets are orchestrated (as opposed to “free”). So, like Whipsaw, I’m not inclined to test the short side yet.

    I suspect that almost everybody here would agree with the orchestration theme to one degree or another. Where I part company with many is in letting disgust have any bearing on trading, in fact I just see it as the background to trade successfully long.

    But I think that Winston is on to something with his semi shorts. I just realized that the indicators that I use rolled over to confirmed sells today for SMH. I’m not going to do anything until INTC releases results next week, but the sector looks fairly bad and there might be a few quid to be made on a quick in & out.

    ==whipsaw==

  48. Globalized says:

    Aaron,

    That’s certainly a valid point. But let’s face it; volume was huge during the summer slide and what happened? The market came all the way back on puny volume.

    Barring some systemic event that over-rides the script and causes things to come unglued, I seriously doubt that Wall Street will be denied their end of year rally.

    Problem is we’re so overbought here that they’ll probably have to orchestrate one or more pullbacks between now and then just to let some steam out. Only question is will it be another 10 percenter, two 5 percenters, five 2s?

  49. Winston Munn says:

    Globalized and Whipsaw,

    Thanks for your responses. My positions are more an intellectual game than serious trading – I guess I could sit out and wait, but the game IS more challenging when you put cash onto the table.

    And Whipsaw, I’m with you on the buyouts and rumors – I’ve mentioned before that I sold short Countrywide on the very morning the buyout rumor exploded. However, I’m not nearly as concerned now over buyouts with credit as tight as it is.

    Myself, I simply can’t find much upside potential in these markets, maybe 3-5%. but that isn’t enough for me to justify a significant risk.

    Or maybe I’m just looking for a black swan and kidding myself – that is certainly a possibility.

    I do think there is some merit in Black Swan thinking in that whether or not one should assume a position is not dependent upon the likelihood of a move one way or another, but the comparative sizes of the potential moves.

    In other words, while an upside of 3% may be a 75% chance, if there is a 25% chance of a 20% correction, the more profitable position would be the smaller chance with greater return potential.

    Where I really have to guard is whether or not I am allowing my economic bias to affect my interpretations. To me, it is way too simple to say that a distribution day is always a down day with higher volume than the previous day – I think the markets are much harder than that to read. In my thinking, William O’Neill offers better insight that churning with higher volume than the previous day with little-to-no price advance or perhaps even down a bit on the day can signal distribution – this becomes more apt in my opinion near the top as froth builds that then masks the distribution so you don’t see a strong down day – just a bunch of churning. And these distribution days will occur while the market is still advancing, which makes them even harder to spot and analyze correctly.

    But what the heck do I know? Nothing. So I guess we will all find out soon enough if my analysis was correct.

    Good fortune to you both, no matter which way the wind blows.

  50. Francois Theberge says:

    SPECTRE:

    THe President is talking about fiscal restraint?? Did I read correctly? The same president that never found a spending bill he couldn’t sign except when it is to provide health insurance for poor children?

    The same president that has TRUE fiscal conservatives enraged beyond words? Who makes sure that all military spending for the “war on Terror” safely stays out of the scrutiny of the American people? You know, 90 billions here, 74 billions there, and soon enough, you’re talking real moolah. Except that it is nowhere to be accounted for in the budget. Darn easy to reduce a deficit if you hide the expenses.

    And you got the nerve to criticize the Democrats?

    Take a hike for Pete’s sake!

    Francois

  51. Stuart says:

    and it keeps getting worse. Boy, this is one big container.

    From the WSJ: Beazer reported that 68% of its prospective home buyers canceled their orders in the company’s fiscal fourth quarter, which ended Sept. 30. The cancellation rate was almost double the 36% of customers who canceled orders and gave up deposits in the prior quarter.

    Beazer is one of the first large builders to detail results from September …

  52. whipsaw says:

    Winston-

    Altho I have usually disagreed with your observations because I have no use for Mises, I have noted that you present them in a civil way and appreciate that. It’s unfortunate that so many around here tend towards us vs. them when discussing almost anything and I don’t quite understand it now, altho I was certainly guilty of doing exactly the same thing back in 2006.

    At any rate, I think that where many get frustrated is with the almost complete disconnect of the market from reality or at least their belief in what capitalism is supposed to be. AFAIK, that’s the market’s constant state with only a few blips one way or the other. Be that as it may, we both know that the big fish are never going to be landed absent a revolution and the market is always going to go up on paper regardless of economic fundamentals because that’s what they require. I gave up on fighting them and am just following along now.
    ==whipsaw==

  53. Winston Munn says:

    Whipsaw,

    Thanks for your kind comments. The one thing I am sure of is that I don’t know for sure.

    Economically, I find Mises easier to grasp as he speaks my language, i.e., psychology rather than mathematics; however, I also believe Keynes had a lot of things right, as well, but missed on the psychological aspects.

    Long term, none of it really matters as we are all dead and the Roman Empire will again collapse.

  54. Jason G. says:

    I’m pretty sure someone wrote a volume trading system that begins trading at 2pm because of some old analysis…

    While the retail numbers came out in the morning, the “someone” didn’t start putting their sale program to work until 2pm.

    We have seen quite a few big changes in market sentiment right around 2pm in the last year or so… so it could be a coincidence.

    Or maybe someone with big volume has a 1:30 strategy meeting that gets everyone back to their trading desks at 2…

  55. Woodshedder says:

    Some nice, thoughtful comments on trading here today. Nice work, guys. I enjoy the change from the normal banter.

  56. j-daddy says:

    I took a look at the minute by minute price and volume action on the Dow, S&P, NASDAQ, BIDU, RIMM, GS, JPM, MSFT, CFC, BA, T, F and GM. Here’s some of what I noticed, all by eyeballing the trends (no math):

    - of those observed, BIDU moves first, RIMM GOOG and GS show distinct drops that follow that lead and the rest are all boring
    - BIDU’s volume first spikes upward at 1:05pm, going from about 8K shares per minute to 80K, and the price starts heading south at 1:17 (when exactly did that JPM report come out?)
    - the first big volume trade on GOOG hits at 1:26 but it doesn’t start to drop until 24 minutes later
    - RIMM’s volume goes from about 20K spm to 290K spm at 1:56, then its price heads down at 2:14
    - the Dow is the first index to start heading down at 1:46, NAS and S&P both start down at about 1:50, but since I’m eyeballing it, that’s all three starting down pratically in unison
    - Here’s my favorite: DOW, S&P and NASDAQ all appear to have hit their low at 3:31

    If I have time tomorrow, I’ll pull the data on all the Dow components and see which ones moved first, when and what the volume was. I know I have a limited sample set, but I’m interested to see if there is any conceptual link between profit taking in tech (or at least in the momentum-driven nasdaq plays) and the broader market reaction.

  57. Global Savings Slut says:

    Re: Whipsaw’s comments about the market mostly always going up because that’s what “they want.

    IMHO, this year (moreso than last), people want/need to raise cash by year’s end and they will need to sell to do that. Also, I think today showed how eager some managers are to preserve whatever gains they have.

  58. Fred says:

    Pullbacks like this one look really scary on a chart, but they are healthy. There were too many bulls (on paper), so a good sharp reversal is needed to shake out weak holders.

    Historically, pullbacks like this bring in the underinvested, and performance envy kicks in. Tech will continue to lead. My fav’s are EMC, VMW, ALVR, OMTR, and RVBD.

    Stocks are still very cheap relative to bonds (and forward earnings)…and earnings will (again) surprise to the upside. This is a MID CYCLE slowdown, which will allow PE expansion.

  59. Winston Munn says:

    Fred,

    It’s hard to argue with your analysis when the market confirms your views.

    This is the interesting question: is this truly a mid-cycle correction, which would mean an unprecedented length of bull market, or is it setting the stage for a fall, as in sucker’s rally.

    For myself, I don’t put much faith in forward looking earnings estimates; however, so far your views have been prescient. Congrats.

  60. upchuck says:

    Winston,

    I think the global expansion, that Barry has highlighted so often, is allowing a longer cycle in this bull market.

    The tremendous pain felt after the tech meltdown, has left many out of the market, which has added to the negativity and disbelief. This block of investors has yet to even get a toe in the water. More to come….

    I think Fred’s on to something.