Free Fallin’
By Barry Ritholtz - November 5th, 2008, 3:48PM
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Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
November 5th, 2008 at 3:52 pm
I’m pretty sure Steve Barry was alluding to such, Market props being pulled, just this morning..
November 5th, 2008 at 3:53 pm
“Gravity
Is working against me
And gravity
Wants to bring me down”
- John Mayer
November 5th, 2008 at 3:54 pm
Profit taking after the big ramp into the election. That’s my explanation. We went up 17% in a week!
November 5th, 2008 at 4:11 pm
A drop down to S&P 850 would be entirely consistent with the trading range of the last 3-4 weeks. I’d feel better about getting long at the 850 level than here. Even better would be a drop to 800 (before going long).
November 5th, 2008 at 4:13 pm
Oh come on…
Yall didnt expect some profit taking today?!! Yesterday was a grand day to sell into strength… it couldnt have been more obvious. Today’s selling was by the people who missed that shot, hung on for some “Obama Rally” they thought would send us higher, it didnt happen and so they sold today. Anyone who was dumping longs into the close was just slow to the game, and were probably alot of the folks who bought into the close yesterday.
Seriously…
This is a classic buy the rumor sell the news bit of trading executed largely by people who shouldnt be trading this kind of market. Volume is just as light today as it was on the advance. The market has moved up alot since 10-10… plenty of an excuse to take a breather here.
I think that we’re trading just as we should be… building a new base around the 950-960 handles on SPX… something we would have done had there been no “Obama Bounce” this week…
Of course my bearish friends will be quick to drop the PPT conspiracy theory… which is just that.
The PPT is all in your head…
Wait… maybe Al Qaeda is shorting SPX futures, and THATS why the market sold off today… thats gotta be it.
And I know the economy is in the shitter… and guess what? That doesnt mean the market wont continue to trade higher.
November 5th, 2008 at 4:22 pm
Scared about the data coming out Thurs and Friday and getting an early start.
I expect the funds to buy Friday bad news or not. If I’m wrong the market might take a run at the bottom again and worse break it.
November 5th, 2008 at 4:26 pm
QID is showing it’s true color now.
http://finance.yahoo.com/echarts?s=QID#chart3:symbol=qid;range=1m;compare=qqqq;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
QQQQ’s down 2% in one month and QID is actually negative 12%.
QLD also down 9%
Now who thinks the double funds work? The one that’s supposed to be positive bias is actually better than the one that’s designed as the double inverse.
Comical.
November 5th, 2008 at 4:32 pm
I-Man @ 4:13
“Of course my bearish friends will be quick to drop the PPT conspiracy theory… which is just that. The PPT is all in your head”
I don’t much believe in the PPT conspiracy theory myself. But at the same time, I don’t see much political advantage for Bush/Paulson to try to prop up the market any more… it’s very expensive to do it.
November 5th, 2008 at 4:34 pm
I hope no one is holding QLD, QID or any of the other double funds or inverse funds. Look at QID, QLD to QQQQ performance over the last month. Both QID and QLD have lost around 10% with QQQQ performance losing only 2%.
November 5th, 2008 at 4:38 pm
DL, I’m with you on that one. Probably a bit of a recovery on Thursday but that’ll just provide a better place to short from.
November 5th, 2008 at 4:43 pm
It’s always technicals….
We may have finished the Wave 4 yday of an unfolding five wave move down. The A wave up was the 839 to 1044 move…the B wave was the 1044 to 845 move which was a .7862* a=c ABC down. The current C wave started at 845 and appears to have concluded yday for perfect .7862 *”a”=”c” at 1007.
The bearish scenario from here is a 1=5 down to 766, which, not coincidentally, aligns perfectly with 2002 lows….
I’m a big buyer at 766 zone….
- AT.
November 5th, 2008 at 4:52 pm
Check out Scott Adams blog (you know, of Dilbert fame), he has a great theory on what just happened in the markets. Its as plausible as any, and even a bit entertaining compared to some of the dry thoughts here today!
November 5th, 2008 at 4:59 pm
jmborchers @ 4:34
I know that you don’t think you can short QID or QLD. But try entering the order anyway. If you’re right, and the order is refused by your broker, you haven’t lost anything. If I’m right (that your broker will accept the order) then you might make some money.
November 5th, 2008 at 5:00 pm
AT, your count coincides with one of the newsletters that I subscribe to. It’s nice to see confirmation among different Elliot wave analysts.
November 5th, 2008 at 5:03 pm
If Intermediate wave four is now complete, Intermediate wave five is due to take the Dow down below 7,200 to complete Primary wave one. That should set the stage for Primary two, a rally that should last a few months, maybe into summer.
November 5th, 2008 at 5:04 pm
Already tried that a long time ago when I realized both funds will go to zero over time (quicker the more volatility). You can’t short the fund (I couldn’t short it with Scottrade and I could short other equities).
November 5th, 2008 at 5:06 pm
How about Meredith Whitney’s late afternoon appearance on CNBC?
‘No One Is Immune’: Meredith Whitney Speaks, Financials Tumble
November 5th, 2008 at 5:33 pm
No clue as to why….
How about Obama making a irresponsible statement in his speech last night saying we are in worse shape than the great depression?
~~~
BR: That’s it! That was why capital markets sold off !
Brilliant analysis –so simple, its pure GENIUS!
November 5th, 2008 at 5:38 pm
jmborchers,
I keep hearing all this criticism of the ultra ETFs, and my response is “so what”? If you’ve got money in a self-directed IRA, these are the only options you have to leverage-up your trades, and to short. So what if they don’t move exactly 200% of the markets – at least they move more than 100%.
Or am I missing something?
November 5th, 2008 at 5:43 pm
E.
They are both losing money. Both the double inverse and non-inverse lost around 10% the last 30 days.
It’s somewhat comical because QLD, the long side fund, lost less than the short side fund even though the QQQQ’s actually went down 2% during those 30 days.
November 5th, 2008 at 5:47 pm
ZUMZ reporting 13.1% same store sales decrease in October. Retail numbers going to be ugly tomorrow.
November 5th, 2008 at 5:55 pm
I don’ t think anyone is really expecting Oct sales to be good. This is when the market crashed and we will see the damage of that for at least 2 months.
The big question I have is will Christmas be better than people expected with lower gas prices than last year?
November 5th, 2008 at 5:56 pm
jmborchers,
Gotcha. I just overlayed QLD and QID and see what you mean. QID is down 11% and QLD is down 9% from 30 days ago – that shouldn’t happen.
I don’t think I’ve ever held one of these things longer than a couple days, so I hadn’t noticed. These are definitely not buy-and-hold instruments.
Thanks!
November 5th, 2008 at 6:03 pm
Folks,
Nobody pays much attention around here…I warned about this back in July and even earlier I think…so obvious, a blind squirrel could see it…
The real collpase happens if Obama gets elected and Bush lets things fall apart so Obama is put behind the 8-ball day one. Then they blame Obama getting elected for triggering the worst of the collapse. A win-win for Bush.
Posted by: Steve Barry | Jul 8, 2008 9:44:34 AM
November 5th, 2008 at 6:08 pm
About as brilliant as all of your liberal propaganda you have spewed down everyone’s throat the last couple of months and blamed the market’s downfall on Bush. On a side note maybe your DOW 6800 prediction will finally come true.
~~~
BR: So, you think it makes more sense to blame the markets on a President-elect who has yet to be sworn into office, for policies that have yet to be introduced, voted on, funded or enacted — and yet at the same time, you want to absolve the Guy who has been running the country for 8 years (6 of them with a majority in both houses of his own party), started two wars (one totally unnecessary), squandered an enormous surplus, ran up an even bigger deficit, alienated our allies, and over saw the weakest jobs creation cycle since WWII ?
THATS your best argument?
If you cannot come up with a more intelligent discussion this, if the most cogent thing you can do is name call and stay mired in campaign partisanship, your input will no longer be welcome here.
November 5th, 2008 at 6:53 pm
the ultra funds are obviously leveraged with options. Since the VIX is way down, both the QID and QLD are down too. In my opinion all the ultra funds are unreliable at best and should be avoided. Some of the inverse funds are fantastic though. The DOG fund works brilliantly.
November 5th, 2008 at 7:05 pm
Ventura2012:
I’m not sure BR will want to say this to you….but you’re clearly an asshat who is starved for attention. Yes, that’s an ad hominem attack and I might be breaking the rules of this blob…but c’mon brother! Wake up!
The Republican Party betrayed it’s origins. The Republicans became the party of huge spending, Big Brother, and the U.S. as Global Police. And, oh yeah, they conveniently enrolled the Evangelicals decades ago to ensure a rabid “base.” All they need to do every four years is throw an “abortion ban” or “gay marriage ban” on the docket in some swing states to ensure a good turnout of “the base.”
We are now paying the price for reckless Republican Rule the last several years and a laissez-faire cheap money Fed.
- AT
November 5th, 2008 at 7:17 pm
How about: the ISM Services number had its largest contraction in history.
November 5th, 2008 at 7:28 pm
1. Buy the rumor, Sell the news. The vast-consensus was that we would have a post election rally, regardless of who won; a relief rally of sorts as uncertainty is removed. So what happened? Traders bought shares in order to be positioned for the rally. That buying drove share prices up over the days preceding the election. However, once everyone has bought and is positioned for the expected rally…. no one is left to buy. That is why the day started off as a routine pullback, but then turned into a bleed as traders started to exit positions that failed to act as expected. (Note also that the end of October is a seasonally bullish period as mutual fund managers mark prices up for their fiscal year closing on Oct 31. During each succssive day of the rally volume declined, indicating the move higher was suspect).
2. Economic news. With bottom thought by many to be in (and retested) and with the election being the primary focus, attention was turned away from economic data. Indeed the reports that have come out over the past week have been horrendous. By that I mean that in many cases, the worst numbers in decades. Traders looked past the data as they looked towards the election. Today it was back to considering the data. The numbers are expected to be bad at the bottom, but they fell off a cliff in October. That makes the currently standing bottom a bit suspect.
3. The Mistress of Doom. Meredith Whitney came on CNBC today and basically said the Financials are still more or less a steaming pile. She moves the market because here spectacularly dire calls over the last year have also proven spectacularly accurate.
4. Fear of what the nonfarm payrolls might have in store for us on Friday.
November 5th, 2008 at 7:48 pm
About the QID, QLD, etc… I think there is a bit of a misunderstanding as to how the funds are supposed to perform. From proshares.com:
“ProShares are designed to provide either 200%, -200% or -100% of index performance on a DAILY BASIS.”
They are not designed to act as longterm mirror/inverse/double inverse. Their timeframe is much shorter. I rarely hold any proshares etf’s for more than two weeks.
Reference:
http://www.proshares.com/funds/performance/UnderstandingProSharesLongTermPerformance.html
November 5th, 2008 at 8:16 pm
500 points is a mere prelude to the big plunge to new lows that’s coming shortly wherein even the longtime bears who’ve all been buying get burned. A vicious bear market is supposed to take down the bears too and they are all long right now.
November 5th, 2008 at 8:55 pm
jmborchers – I don’t know what you’re talking about – I’ve made a boatload of money (easily 100+% return) jumping back and forth between the SKF and UYG – the financial sector ultras pro- and con- ) since mid September. SKF when the S&P flags a short-term top, UYG when it flags a short-term bottom. Loving the volatility It’s going so well and so easily it’s almost scary.
November 5th, 2008 at 9:03 pm
Money, not History, Means Most to Markets
http://online.barrons.com/article/SB122586456103500975.html
The mundane matter of credit, not U.S. elections, boosts stocks and bonds.
EXCERPT:
November 5th, 2008 at 9:10 pm
“The state is looked upon to maintain the citizens’ health and material well-being.”
It’s called spreading the wealth. Some of us give in money, some of us give in time. Therefore, we should all benefit.
November 5th, 2008 at 9:48 pm
Maybe the unobservant found out that Paul Volcker is on the Obama team and is afraid he’ll come to power and won’t agree with destroying the dollar to save it. I’m sure he must have noticed the similarities between us and Japan of 15 years ago, although at least Japan had tons of reserves to spend.
Finished listening to Financial Reckoning Day: Surviving the Soft Depression of the 21st Century on the 6 hour drive back to NoLa from Houston and, while I don’t necessarily agree with all his conclusions, some of the descriptions of Japan are uncannily like what’s going on now. Pretty good for a book written 5 years ago. He was comparing Greenspans printing money after the dotcom bubble to Japan. He didn’t foresee Greenspan being able to create another bubble and then Bernanke outdoing Japan on printing money and propping up zombie companies, but it doesn’t really affect the validity of his arguments.
Another possible cause of the drop could be all those people driven to hysteria by Kudlow and Maria beating the drum about how Obama’s going to tax the “investing class” so heavily. They are taking gains now so he can’t steal the gains and give them to lazy ____________s (fill in your favorite racist term here).
November 5th, 2008 at 10:16 pm
Man, shit is getting weird. Bush is the biggest Socialist yet, California(!) votes yes on Prop 8, Al Franken might be a Senator, The Fairness Doctrine is being talked about seriously, the losing VP is really hot, we’re building a bullet train from LA to SF (surely not for the Bay Area folks), the world loves us again until they don’t……
November 5th, 2008 at 10:50 pm
A lot of talk in NYC about what marginal tax rates are going to — 70%? (Before NYC City and State)
Also, the hard landing in China is taking down stocks — Roubini is talking about this, as are wall st. strategists, some talk that this could take S&P earnings to $55.
Other thoughts on that?
November 5th, 2008 at 11:15 pm
seems a little quiet around here, just me? Barry, how do the site hits on the original url compare to this new one?
November 5th, 2008 at 11:41 pm
Its split — about half of the traffic is still going to the old site while I dual post.
It will take about two weeks for the full transition, code changes to the typepad site, etc.
The registration requirement to post — and not have to use a captcha — is the issue. I expect the registration to crank up over the ensuing weeks . . .
November 5th, 2008 at 11:42 pm
>>As Richard Nixon remarked as he put into place his economic program of wage and price controls, import barriers and a devalued dollar in 1971 that “We’re all Keynesians now.” The Reagan Revolution, which repudiated that assertion, is now over.<<
I’m concerned that the Republicans and the Blue Dog Democrats are opposed to large increases of straight fiscal spending- this is the next needed step. However, each step in this bailout process has only come when the markets are plunging and we suddenly realize that the problem is worse than we thought. This generates the political will to take more stringent action. The fiscal spending that’s needed will only come after the next time the market dives. The only question is when will that happen? That’s partially why I can’t get long at these levels. I need new lows.
I’ll take the “over” on unemployment and the “under” on GDP for the next month or the next year. The economy has fallen on it’s face and it’s not getting up on it’s own.
November 5th, 2008 at 11:44 pm
“They are taking gains now…”
This rings true. For anyone with any gains left, it would be best to take them now at the current, record low rate, before a new administration changes it. The last trading day of the year should be interesting.
November 6th, 2008 at 12:10 am
To those saying QID has not been performing and that it is only to hold short-term, consider this…since 9/2, QQQQ is down 27%…QID is up 58%, plus paid a 20 cent dividend. Perhaps you should lengthen your holding periods, not shorten them.
November 6th, 2008 at 12:26 am
Steve, that’s not how it works but you can think what you want.