Dow Gains 15% in 7 Hours
By Barry Ritholtz - November 24th, 2008, 3:53PM
Astonishing: The Dow has run from 7450 to 8598 — more than 15% since Friday at 2:30
Macro Notes
We don’t want your help because maybe we don’t need itPeter Boockvar
While yesterday's US stock market close was poor, Asia and Europe didn't follow today as debt in Greece, Spain, Portugal, etc... rallied, their CDS narrowed and stocks bounced. The Greek finance minister said January tax revenues came in above expectations and that spending was below target for the month and said "that means the deficit reduction for January is well within what we have promised." The euro is rising in turn. Also helping is the story that Trichet is headed to the European Union leaders summit a day early in order to address Greece's problems even as the Greek finance...
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November 24th, 2008 at 3:56 pm
Still riding the wave here. Am happy with the results lately but this is pretty ridiculous.
November 24th, 2008 at 3:57 pm
That was a nice 250pt drop in 5 minutes…
November 24th, 2008 at 4:00 pm
Like I said before, 5-10 minutes is an eternity in this environment. Incredible.
November 24th, 2008 at 4:04 pm
I swear that we are all living in an absurdist comedy….
I guess I can afford to laugh, since I was VERY lucky to have sold off my SKF, SRS, etc. recently. Otherwise the last 1.5 sessions would have constituted serious prison rape. Asides from feeling a little pain from my EEV and (a tiny piece of remaining) FXP, it’s good to have stocked up on cash.
I still think that most market participants are delusional right now. Euphoria over Tim Geitner and a Citi bailout? That’s worth a 15% gain? Another 5% and we’re in some bull market territory, lol… I’m guessing that if the S&P500 even sniffs anything close to 1000 that there will be A LOT of short-sellers licking their chops…
Happy trading, ya’ll!
HCF
November 24th, 2008 at 4:04 pm
I am enjoying the rides up and down just wish I didn’t have to wait three days to settle. Usually I leave a little powder dry but not today. Sold DIG at the top and wanted to get back in to DUG at 32, but alas no cash.
It makes no sense to me but starting to realize that I just need to go with it and let someone else worry about sense.
November 24th, 2008 at 4:06 pm
Yeah, cool! We got ourselves a convoy! , I mean rally!
This market is great! We are almost back to 8500!
I didn’t think I would be getting ready to reload the shorts again so soon.
Just gettin’ mo’ powder ready today… pour and pack it maybe on Friday.
November 24th, 2008 at 4:10 pm
On second thought, the economic news calendar looks rather daunting tomorrow and Wednesday… And Friday is an eternity away in this environment.
November 24th, 2008 at 4:16 pm
For one of the first times this year, I flipped my SKF and SRS perfectly. Went short via options on each Thursday night, sold this afternoon. I left a LOT on the table today though, selling out at about 2:45 when I felt (why?) that the rally might be losing some steam. Booked some great profits, but kicking myself for not having the fortitude to ride it out until close – I wanted to. I’m 100% in cash right now as I have no idea where we go from here, but am perfectly content with my YTD returns and being on the sidelines going in to a nice, relaxing Thanksgiving holiday.
BR, after the break I’ll be trading a small portfolio based solely on the Fusion IQ buy/sell calls, a subscription I purchased today. Playing with house money, and I’m impressed by some of the buy/sell calls I’ve seen in your archives this afternoon. Will be an interesting experiment – looking forward to it.
November 24th, 2008 at 4:18 pm
reloaded the bank puts this afternoon.
disappointed in my OTM calls -not a lot of juice, considering the moves in AAPL & SPWR.
too far out, need another leg up? santa?
option traders not having it.
November 24th, 2008 at 4:20 pm
I guess you may have to wait a few days for that $120 QID.
~~~
BR: Fer sure . . . .
November 24th, 2008 at 4:21 pm
I’ve noticed that everytim Oboma speaks or appoints a member of his team, market goes up. He’s doing his patriotic part in keeping up the market.
November 24th, 2008 at 4:25 pm
I think we could see a real bear market rally this time up another 15% to 975 or so on the S&P. That would be a nice time for me to buy back into some short ETFs. I still think this is not a bottom, we will see pain in the new year. My guess is 675 S&P 500 bottom in late March or early April. It has been a pretty amazing couple of days.
November 24th, 2008 at 4:28 pm
In other words, welcome back to last Wednesday…
November 24th, 2008 at 4:32 pm
Last Monday nite on BP, I called for a 500 pt. one day drop in the next five trading days.
While I never got my 500 pts., two days over 400 exceeded my expectations.
On Thursday of last week, I called for the 15%-20% dead cat. As of today, that came true as well.
The beauty of this market is that even a joker like me can get a few right.
Oh, by the way, the equity markets hit bottom at 750 last Thursday. They don’t ring the bell.
Calling it out. 750 was the bottom.
Who do we have to thank? Well, us, the US taxpayer.
750 was the bottom.
November 24th, 2008 at 4:37 pm
A rally such as this can only occur in a bear market…furthermore, today’s QQQQ volume was below Friday’s, which was below Thursday’s. Volume is lower each day. And msecc points out, the Dow dropped 250 in a 5 minute span before the close.
As for Citi, there is no way the government could have done the proper due diligence on this deal. Who could figure out what these instruments will do? It is throwing money down a pit. Chris Whalen said on Bloomberg Citi was now like a utility…I would add a utility that pays viryually no dividend. UMMM, that’s where I want my money.
November 24th, 2008 at 4:38 pm
@Johnny
Market got whacked while he was speaking!!? DJ 330 to 160. Then back up afterward. I didn’t get the feeling
November 24th, 2008 at 4:42 pm
… people liked what he was saying too much. No details whatsoever = bad for markets.
November 24th, 2008 at 4:47 pm
Bought a bunch of Dec strangles today. It’s nice not to care which way the market moves, as long as it makes big moves. Still mostly long overall though.
Sold the “C” LEAPS from Friday, not going to get greedy with 100% overnight profit.
November 24th, 2008 at 4:51 pm
I’m still planning on s&p 1100 by early next year. That’d be a 47% rally. You can’t have a 75% market drop all in 15 months…there has to be some rallies in there too. I wouldn’t consider those 2- day 25% rallies last month to be included. We need a multi-month rally to get back up to the moving average.
November 24th, 2008 at 4:52 pm
CPJ13:
May just be that the buyers stopped to listen. The sellers don’t really care.
The selling in the last few minutes may have been the PET (Plunge Encouragement Team) that seems to like to come in at the end an sell. If this keeps going up and they get bit bad enough, we may see an end to that. Some gimmicks only work so long.
jason:
I had a buy order for DUG in at 31, but it dropped so fast I moved it down to 29. Low for the year is 25 something.
At this rate, I suppose we will know by Tuesday evening if we are in the predicted bear rally or a trading range. A rally would be more credible if the averages went up more slowly.
November 24th, 2008 at 4:53 pm
I just hope that there are rodeo clowns to save me when I am thrown, so that I don’t get trampled and gored.
I see lots of clowns, but I don’t think that they’re intending to help me …
November 24th, 2008 at 4:55 pm
For most of the day, 840 S&P was resistance. It broke through and shot up, then had a successful retest and bounced again. IMO, that was very important that 840 held in order for this rally to have some legs.
I think as the volume lightens up throughout the week, the rally may continue. I also think Black Friday is going to be bigger than most think. Normally I woul dhave sold today, but something was telling me to say in this time.
November 24th, 2008 at 4:55 pm
@CPJ13: Then why did the markets go right back up in a huge way after O was done talking? None of the details changed after he got done talking. I think you’re putting too much emphasis on any one event when we all know nobody really has any clue why markets go up or down on any given day or period of time. O would also be a fool to offer any specific details right now. He’s not president yet and has no idea what conditions will look like in two months when he takes office, so unlesss W and Cheney decide to resign, then why commit to anything too specific beyond his appointments now? That would be a panic move and this man hasn’t shown a propensity to panic at all.
This is merely a bear market rally (dead cat bounce) that was long overdue (on light holiday week volume). We may have another leg or two up from here but there will be more selling into those rallies like we’ve had in recent weeks. I, for one, will continue to ride that wave in both directions. Sold all of my SRS Friday, some QID and GDX (although I still retain a large holding) and picked up a few long positions last week. Did quite nicely the last two days but I’m selling into strength. Nothing gets held for the “long term” right now.
November 24th, 2008 at 4:57 pm
Investors appear to have the attention span of a 2 year old.
Sadly, it appears that many CEOs have the manners (MINE! MINE!) of that smae 2 year old and that our leaders have the skill level (Bush made big poopy of economy, Taxpayers stuck with changing diper).
America: Despritly in need of grown up supervision that makes it eats some vegetables and go to bed without watching TV.
November 24th, 2008 at 5:11 pm
The bailout rally sings this song,
Doo Dah Doo Dah
The bailout rally not so long
Only lasts a day
Sell before the close
Don’t hold another day
I bet my money
on a Google long
I wish I’d sold Ebay
November 24th, 2008 at 5:12 pm
That’s what happens when you throw trillions at the markets; they respond.
Some debate the existence of the PPT. What would call it when the Treasury and the Fed always interfere to prop up equities? It’s not exactly a secret.
November 24th, 2008 at 5:12 pm
When is the BAC crisis scheduled for?
I want to be sure to be short again before then.
If C needed more help, I feel fairly certain BAC is going to need more too.
Another bank crisis; another bottom.
Anyone have any thoughts on BAC?
November 24th, 2008 at 5:21 pm
@ KJ Foehr:
Thoughts on BAC???
Wouldnt touch that POS from either side of the trade… or any financial for that matter. Too many other playgrounds without toxic shit on the balance sheet.
But…
If I had an account that I didnt give a rats ass about leaving dormant for a few years, sure, I’d buy some BAC.
November 24th, 2008 at 5:27 pm
Seems to me that no one has any clue what the state of the American or global economy is today or a year from now… no?
November 24th, 2008 at 5:28 pm
My thoughts on BAC:
They will lose more money on MER than on all their other garbage combined.
Also, in the all-time cluelessness department, Ken Lewis is rapidly approaching Neville Chamberlain.
It’s hard to think of a bigger stooge on such a grand stage. I am hearing from my *peeps* that inside of Merrill Lynch, they are laughing at Ken. Seriously. Someone should document this ridiculous man. They can even borrow my title – “A Rube On Wall Street”.
November 24th, 2008 at 5:31 pm
I shorted some today (near the 850 level). I’ve entered a limit order to short some more tomorrow.
(I assume that next week, the auto bailout soap opera resumes).
November 24th, 2008 at 5:34 pm
citi bailout was very decisive. big bears cannot risk it anymore. we are going up. there is a lot of skepticism about this rally including this blog, bloomberg, cnbc etc. i think it is a denial stage for bears.
we were down 55% from the pick. this rally has some legs.
i am 100% long. good luck (since last thursday.)
November 24th, 2008 at 5:35 pm
@ Mannwich, Mike:
Agreed, I just felt that the market movement today was generally re: C and then the boxes kicked in at the end. If Obama had said something specific about the Bush tax cuts staying in effect until expiration we could have had a 1,000 point day. I don’t think his speech affected the markets at all – was simply thinking that the ‘every time Obama speaks, market goes up’ might have been a stretch.
November 24th, 2008 at 5:35 pm
SKF dropped from 300 to 164 in the space of 7 hours.
I think it’s worth buying some at 160 if it gets there by Wednesday.
November 24th, 2008 at 5:40 pm
gnomic @ 4:57
“Investors appear to have the attention span of a 2 year old”
In this market, that may be an asset.
November 24th, 2008 at 5:55 pm
So the market likes it when idiot bankers get bailed out.
What will be the market’s reaction next week, when idiot auto makers get bailed out?
November 24th, 2008 at 5:56 pm
Wild swings on low volume. Continuing bad news. A tapped out Treasury. Perhaps a phantom Santa Claus rally. I’m staying long – in cash.
Money can be made in this market. The question is what will your USD be worth now that we can all hear the whirring noises of the Feds printing press.
November 24th, 2008 at 6:06 pm
We were pointing out last week that from the 1440 high in late May, it was now easy to observe a five wave decline to complete the Major degree Third Wave. It exceeded the one=five target of 768 but had a nice snapback on Friday and Monday, suggesting we’re probably in the initial stages of a prolonged Major Degree Wave Four whose targets are: 906 (23.6%) or 1008 (38.2%). What’s fascinating about this is that the 1008 target aligns PERFECTLY with where the minor degree Wave Four completed a few weeks ago. This is a very common occurrence in subdividing five wave patterns.
It’s never easy though. The move from 1008 to 741 is NOT the cleanest looking five wave pattern I’ve ever seen and the duration of the move was very small compared the first wave. One would have liked to have seen a more prolonged fifth wave into the end of the year or beginning next year. Oh Well.
So for now, we look good to move to the 906 – 1008 zone, with the 1008 being my optimum target. I wouldn’t rush out and chase the market at this point. The 10 yr bond looks to be in it’s own little fourth wave at this point and looks to have at least one more leg higher in it, which is not bullish stocks. Also, we just had a very powerful move up. I’m looking for a correction on the SP500 back to 768 – 788 zone over the next few days, which is a BUY area. Would NOT want to see a decisive break below 768.
- AT
November 24th, 2008 at 6:27 pm
Volatility is addictive. As a commodity broker/trader for many years the kind of action we are seeing was always going on in one of 20 markets during any given month. It attracts folks like a wild craps game. Enjoy it while it last. You will miss it when its gone. These episodes only come a few times. Commodity Perspective used to put out a yearly edition of every daily futures contract for each year. You want to see action, look at those! If you are really sick trade Bellies.
If you want this juice everyday become a commodity broker, 10 to 1 leverage. Most of the time the stock market is boring by comparison.
1974 still rules as of now.
November 24th, 2008 at 6:51 pm
Paulson’s message to shorts: “Go ahead, short BAC… see you Sunday night.”
The last fifteen hours have been interesting, I don’t know what will happen in the next fifteen hours, however, I’d lean toward going long for the next fifteen years.
November 24th, 2008 at 7:27 pm
Man o man. Tried to buy a Dec SKF 240 put on friday when it was trading at 290. Got screwed, with no settled funds available. Would’ve been my first option trade and would’ve made me a believer!~
November 24th, 2008 at 7:27 pm
I’m slightly long
I’m thinking 1110 – 1120 and possibly a little higher going into Jan. The shorts will get some pain on this one. I still think we could see 450-550 SP eventually. It will take a long time to get there though.
November 24th, 2008 at 7:53 pm
I don’t even blink an eye at this kind of thing anymore. I expect it. A day with a less than 200 point move is an anomaly.
November 24th, 2008 at 8:10 pm
For those who watched the werewolf movies from the 50’s. You remember that look the gypsy would get when our hero would ask if she could help him? Tomorrow is going to be bad for the longs. Sales, corp profits, consumer confidence, gdp and red book. Do you seriously think any of these reports will be good? Look out!
November 24th, 2008 at 8:58 pm
I wouldn’t stand around waiting for reasons to continue shorting here. All of the bad news is baked in and we are likely at the cusp of embarking on a multi-month countertrend rally. We should shoot way up through the end of the week and then sell of again until mid-December. However, don’t expect the headline indexes to make new lows next month but rather a new series of higher-highs accompanied by strengthening market internals will confirm the new uptrend. Most pundits will call this the end of the Bear but will likely get a very rude awakening come June ‘09 when it starts to roll over again. Then onward to devastating new lows. All in my imagination but that’s my count anyway..
November 24th, 2008 at 9:12 pm
@jakester – i think that is right on the money.
November 24th, 2008 at 9:23 pm
@jakester: when what starts to roll over again?
November 24th, 2008 at 9:27 pm
I’m trying to figure something out and I’m hoping someone here can explain. I guess it is probably ETF 101. Months ago I was in DUG bought around 25-27 in lots and then sold from 39.50-43. I remember people here said I sold too soon, which in the end I did. Oil has continued to go down yet DUG trades at 33 something. Is this b/c it is the inverse of DIG and DIG holds big in XOM which has not gone down as much as other holdings, I’m not understanding the price on DUG.
Sorry if this seems novice I don’t really use a lot of ETFs.
November 24th, 2008 at 9:36 pm
It looks like we’ve exhausted this round of selling and now we’re going into a 3 week to 3 month relief rally before things turn ugly again. We’re bound to get a counter trend rally and here it is.
November 24th, 2008 at 10:07 pm
Gary Schilling called today for S&P earnings of $40/share next year, and a final low of 600 on the SPX.
November 24th, 2008 at 10:15 pm
Andy Tabbo @ 6:06
“Also, we just had a very powerful move up. I’m looking for a correction on the SP500 back to 768 – 788 zone over the next few days…”
I don’t think we get a big correction this week. I’m thinking next week.
(The market tends to be up the day before and after Thanksgiving).
November 24th, 2008 at 10:15 pm
I’ve got the sneaking suspicion that the massive July and September squeezes have conditioned too many of us to expect another.
November 24th, 2008 at 10:29 pm
@DL
If earnings go to $40 a share the SP is not going to bottom @ 600. In that case you’d expect more like 240 which I hope is at least very unlikely!?!
November 24th, 2008 at 10:41 pm
ben22 @10:22
Schilling was postulating a 15 multiple, which he said would be realistic given the very low yield on the 10 yr treasury that he is predicting.
November 24th, 2008 at 10:45 pm
DL,
Understood, but my thought is if earnings are going to drop by over 60% from peak then I would think a single digit p/e is more likely
Sorry if I don’t buy anything Schilling says, that guy was predicting this forever ago and had his clients loaded with cash and bonds most of the run to 14k, it is great that he called this and all but he manages money and being early is the same as being wrong.
November 24th, 2008 at 11:10 pm
ben22:
My general understanding of the phenomenon is that the inverse and ultralong funds are put together with derivatives and there is a lot of “friction” in their price movements caused by having to pay the high premiums resulting from the volatility we have experienced lately. Thus, they don’t move in sync with the prices of the underlying securities like a simple basket of securities like OIH.
There have been complaints about this before. Because of this, they may not be good in up and down markets like this, at least over longer terms.
November 24th, 2008 at 11:37 pm
Extreme volatility in a low-volume market whipsawed between greed and fear is to be expected. But seriously, a $300 billion dollar band-aid on Citi’s sucking chest wound (not counting the $2 trillion in transfusions already administered by the multi-millionaire “geniuses” at the GS/Treasury shadow government) is going to solve our problems? Suckers. We’ve got $60 TRILLION in notional crap on the books of these so-called financial institutions. The only way out of this mess is Lennon’s, I mean Lenin’s solution: We renounce it (i.e., the politburo buys it). That’s where this is all headed. And as a law-abiding tax-payer whose children and grand-children are going to be beggared by the massive GREED, STUPIDITY, and INCOMPETENCE of the so-called Masters of the Universe on Wall Street, I want to know whose head is gong to be the first to take a ride on a pike. Rubin? Greenspan? Lynch? Fuld? Cain? Greenberg? Paulsen? Blankfein? Mack? Prince? Don’t be shy. There are no shrotage of pikes….
November 24th, 2008 at 11:43 pm
Mike in Nola @11:10
Short QLD if you’re bearish; short QID if you’re bullish.
November 24th, 2008 at 11:48 pm
ben22 @ 10:45
If you started listening to Schilling in the middle of 2007, you’d have made a lot of money (or at least avoided losing any).
I don’t know how long he’s been bearish, but I do think it’s likely that he’ll remain bearish long after the ultimate bottom in the market finally comes.
Nevertheless, much of what he predicted back in ‘06 and ’07 did come to pass.
November 25th, 2008 at 12:04 am
Except for the $USD, I don’t think you can find me a bullish weekly chart.
November 25th, 2008 at 12:05 am
ben22, about leveraged ETFs…
Throw a couple of columns into a spreadsheet and have both start at $100. Have one column go up 10% the first day (multiply by 1.1) then down by 9.1% (divide by 1.1) and keep doing that for several rows (days). Have the $100 in the second column track what the double (or double inverse) fund would do for each day. You’ll notice that the although after an even amount of trading days, your underlying index (first column) ends back at 100, the double (or double inverse) ends up having lost some of its value. I played around with different numbers and here are some general trends I noticed:
1. For a sideways trend, the longer the time frame, the more value decay in the leveraged ETFs.
2. Double inverse ETFs experienced more value decay for the same underlying index movement than the double ETFs.
3. The higher the average daily movement, the higher the value decay.
4. The higher the variation in the daily movements, the higher the decay.
This is just what happens when the market churns in place. Obviously if you get the index moving in the direction you want for several days in a row, the leveraged ETF will far outperform it.
So in other words… what DL said (11:43).
I opened some put positions in SSO, DDM, and QLD myself today. My hope is that the volatility decay of the 2X ETFs should help offset the time decay of the options.
November 25th, 2008 at 12:16 am
That’s some great analysis on the leveraged ETF’s, momosapien. Very interesting.
November 25th, 2008 at 12:40 am
As I commented before, you guys really need to consider using Rydex or ProShares Mutual Funds and open an account directly with them instead of using the 2x ETFs (if holding overnight). The ETFs are perfect for intraday trading but the slippage and time decay will eat away at your profits and/or enhance losses if yu hold those overnight. Bust out a perfchart and you will see exactly what I am yappin’ about
November 25th, 2008 at 1:09 am
momosapien @12:05
“I opened some put positions in SSO, DDM, and QLD myself today. My hope is that the volatility decay of the 2X ETFs should help offset the time decay of the options”
I don’t understand why anyone would want to buy a call option or put option on QLD (or SSO). You can get all the leverage you want by buying options on QQQQ… and those options are more liquid than those on QLD. I don’t think you’ll get that much volatility decay in QLD over the time (1 month) that you’ll be owning options on it.
(I shorted some QLD today).
November 25th, 2008 at 1:12 am
jakester @ 12:40
I will not get within 10 feet of an open-end mutual fund as long as I live.
November 25th, 2008 at 5:42 am
@momosapien: sorry, but that exercise you suggest wouldn’t work.
if SPX goes up 10%, then SSO goes up 20%. if SPX goes down 9.1%, then SSO goes down 18.2%.
in spreadsheet example, there’s no decay in the principal.
it’s not the math that creates the problem, it’s imperfect structure of the security.
November 25th, 2008 at 8:06 am
thanks for trying to answer my question I appreciate it.
I guess what I’m ultimately wondering is that I’ve seen calls for QID @ 120 from both SB and BR now and I’m wondering how you can go about setting price targets on the ETF’s.