Another day, another rally-selloff-reversal-whipsaw-last-minute-surge/collapse/panic. And that was just the open!

By the end of the day, we had managed to bounce up 150. Had the markets been open another 30 miniutes, we might have closed down by that much. There was that muc volatility.

What does this directionless chop, pop and drop mean? Anything, nothing?

What say ye?

Category: Markets

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.

50 Responses to “Whiplash Open Thread”

  1. jmborchers says:

    Big trouble BR.

    Look at the Korean Won.

    How much did the Fed swap with the Korean bank? The credit swaps have now done nothing to help the Korean currency.

    Samsung, LG Philips, KIA etc etc likely will go BK.

  2. karen says:

    This may be far-fetched given the fundamentals but here goes:

    No one can argue that the trend has been down. Volatility often signals a trend change. For how long, i don’t know.

    Did anyone else think that real estate would tank after the dot.com bubble burst? It didn’t take long for that to replace dot.com.

    Keep your eyes open and ears to the ground.

  3. jmborchers says:

    New Zealand and Austrailia, new 52 week lows for market indexes.

  4. elliotbloch says:

    decent volume on the day but decliners outnumbered advancers 2:1…
    anyone see order flow? any ppt evidence?

  5. jmborchers says:

    PPT likely into on the S&P futures at 850 1:30 PM or so.

  6. Archiphage says:

    It means that I can’t hold on to a position for a decent gain, and it means I get to practice trading through drawdowns. I hope this choppy period is over soon, but I’ll keep taking my setups as they come no matter what. All I know is that streaks happen, they’re unpredictable, and I sure like them better when they’re the winning kind!

  7. leftback says:

    I think nasty choppy trade like this indicates lighter volumes and itchy trigger fingers. There isn’t much conviction out there in terms of market direction. We are clearly waiting for some significant macroeconomic event to drive the market in one direction or the other. Of course I think that this will be some kind of reflationary event.

    It’s hard to know what might be the trigger but it is clear that the $ will not go to the sky, and treasury yields will not go to zero. I have been seeing quite a lot of volatility in the long bonds, and that often presages a fall in price, whatever the instrument.

    @ JM: Samsung is a really good company that makes terrific products. If you know anything about Korea you know that Koreans are fiercely proud people who would do anything to protect their industries. In Korea, we will see the government take a different approach from the US. They will do anything they can to support Samsung, LG, Hyundai etc.. and this is wise, not only because it saves jobs (which are important for social stability) but because those industries that survive will serve the China market once we get to the recovery side of this “event”. In order to save jobs they will sacrifice asset prices, and people will save and sacrifice. Koreans understand this much better than Americans.

  8. jmborchers says:

    Yes Left Samsung product is good but LG product is not. Kia is not. Unfortunately, Korea needs to import just about everything to survive. With import cost up 50% that’s kind of an issue. Remember in the 87 crisis many Korean companies went BK including KIA.

  9. constantnormal says:

    The wheel is turning and you can’t slow down,
    You can’t let go and you can’t hold on,
    You can’t go back and you can’t stand still,
    If the thunder don’t get you then the lightning will.

    –The Grateful Dead

    This is, in my experience, typical as markets progress toward capitulation. The tempo increases, as do the violence of the oscillations, until even the most dedicated traders are “thrown” from the horse or wisely decide to step back to the sidelines and let others’ blood be shed instead of their own.

    Kinda like playing Space Invaders, or musical chairs.

    We’re some time away from the end of this game, IMHO. We’re not seeing swings increasing in size … yet.

  10. DL says:

    Yes, today the Dow was up 150, but the Nasdaq was flat, the Philly semiconductor index was down 2%, and the XLF was down nearly 1.5%. This baby’s going lower; however, I’d rather not initiate a new short position unless we get a significant rally (at least 8%).

  11. going broke says:

    Kinda looks like the bears are winning a tad… close ($8424.75) just below the 5 day PP…

    1st Resistance = 8954.54
    Pivot Point = 8451.14
    1st Support = 7921.35

  12. Steve Barry says:

    The short interest data I have looked at recently tells me that hedge funds are not providing the liquidity they have in the past by shorting stocks. They are deleveraging and are basically hamstrung. They will get creamed with redemptions, as who will pay 2 and 20 for mutual fund type returns? The result is a market that has lower than capitulation volume with choppy trading. Also a market where no short squeezing can take place on a macro basis.

  13. The market is moving as if there is no volume.

  14. Myr says:

    The directionless pop and drop around our recent lows means that ,when we break out on the downside, the move will probably be larger than expected. The market has been thinking that down 50% on the S+P(783) from the all-time high is a support level, but it probably won’t hold and we could plunge right through it. The market is definitely setting up for a nice rebound(20 – 40%) from the coming lows, but that low may be 700(approx 6800 on the Dow). That’s down 55% from the top just 13 months ago. Yes, that’s sounds insane, but these are insane times.

  15. Simon says:

    Far be it for me to be able to add value to more sage messengers, however when last time Barry asked the same question … when the current pattern was just forming, I said that it would be back and forth with a break out in the direction of the trend within the pattern. So if the pattern were to trend up, up we would go. If the pattern were to trend down….the pattern is trending down and so is the news.

    In my original post I said I expected it to break out upwards but that this was a time to sell into strength for a larger move down. Elliot fifth wave kind of thing.

    Unfortunately everyone else seems to be saying, too bad, no strength for you today, look out below.

  16. VennData says:

    As leverage leaves, paper stays, creating relatively light volume. Programs are moving levels quickly, as correlation rises. Arbs can’t hold positions.

  17. leftback says:

    @ Steve Barry: I agree completely. I was hoping for a squeeze to get going today and there was just no energy for it at all. It sure seems as though many people used the previous squeeze rallies to exit. Now nobdody wants in on either side of the trade overnight. So I am back to selected longs only, in the commodity space.

  18. jmborchers says:

    It’s bigger trouble than that because as equities continue to fall banks have less to loan. Why banks are all invested in each other I have no idea but it’s going to be part of what will cause the total collapse. The Asian banks are now taking it from falling housing. Each bank will take out the next. Who’s the next Lehman I have no idea. Puts are too expensive on banks.

  19. Simon says:

    770 look s like a great big magnet saying come to me, come to me…On the other hand should a whole lot of shorts jump in at the last moment… anything could happen.

  20. constantnormal says:

    You guys are freakin’ me out.

    Based on the principle of the markets moving to frustrate the maximum number of people, it appears we will see good crowds in the malls this weekend, and a ginormous rally through the remainder of 2008.

    Just kidding.

  21. bri says:

    yes, let’s talk our books, shall we?

    set up for a comparable crash to the last one (11k to 8k).

    this one: 8k to 6k.

    we can do it now, or next year. up to you. you can hold cash and you can own puts.

    and yes, puts have been expensive since BSC. remember dem?

    then again, i’m about as sure of this as of what i’ll eat for lunch tomorrow. no clue.

    happy trades, hedge it out.

  22. Simon says:

    Gold is looking ripe for some sort of move…maybe like September drop then POP.

  23. jmborchers says:

    Constantnormal. My theory involved that the stock market needed to recover somewhat going into the holiday season. All the companies warning of major shortfalls just seals the deal and adds to the panic. Companies should not have given guidence in this environment. Corning gave guidence down some 50% of last year Oct 29th and totally pulled it this morning saying it may be or break the low side. I believe that the stock market leads the economy. Being back down to the 820-850 S&P level is trouble. The October plunge is on most banks and stocks books for 4Q and we haven’t even seen the effect of that yet.

    When Treasury Sec Paulson was asked this morning about a bank wanting to apply for TARP and his office said look around for M&A or other money first and that bank said no we want to apply. It was like the Treasury was pushing away that bank. The only reason you would need to do that is if you don’t have enough money to cover the shortfall. You can probably find today’s testimony on CSpan.

  24. leftback says:

    Sooner or later we will have a day without apocalyptic news. A 2% up day would be healthy.

    Hard to see any general or prolonged rally. When you look around there are overpriced stocks all over the place with downward earnings revisions likely in all retail, tech and a lot of industrials after this $ rally. The only possible relief is lower gas prices might render the holiday season forecasts excessively pessimistic.

    A few sectors that have been beaten down would benefit from the inevitable downturn in the $ when it comes along. Commodities, banks, and some of the emerging markets should all benefit when the wheel starts turning, and gold, Simon. The fact that gold was not annihilated by the PPI number is bullish in the extreme.

  25. jmborchers says:

    Is there one thing for certain? Whatever asset starts to accelerate will be a pile in trade because all the cash is waiting to go somewhere that works?

  26. DP says:

    Is it still campaign rhetoric when the election is already won. I know where I’m picking up longs here and there:

    Further, we will invest $15 billion each year to catalyze private sector efforts to build a clean energy future. We will invest in solar power, wind power, and next-generation biofuels. We will tap nuclear power, while making sure it’s safe. And we will develop clean coal technologies.

    This investment will not only help us reduce our dependence on foreign oil, making the United States more secure. And it will not only help us bring about a clean energy future, saving our planet. It will also help us transform our industries and steer our country out of this economic crisis by generating five million new green jobs that pay well and can’t be outsourced.

    Source: http://www.change.gov

  27. TrickStyle says:

    Jeremy Grantham, a well-known value investor, recently wrote that we could expect a post 10/10 crash low of 50% below fair value S&P. His downside goes as low as 585.

    Why not.

    Reality still hasn’t set in among regular folk. The US consumer is out of money.

    I’m expecting another 500 pt. loss day on the DOW in the next 5 trading days.

    I think there’s another growing wave of fear and uncertainty.

  28. bri says:

    DP, got calls here and there as well.

    and unlike puts, they are very cheap.

    leprechaun portfolio: short, green and lucky.

  29. foolsgold says:

    So we’re seeing crazy price action with more volatility than usual (???) within the last hr/half hr of trade. Check out the volume going through near/at the close (the last half hr) over the last 4 sessions. On the 13th and 18th of Nov when we saw impressive rallies of over +2% in the last half hr these were supported by significantly more volume than when we saw big sell-offs in the last half hr of trade on the 14th and 17th.

    So if we use the last half hr of trade over the last 4 sessions as a proxy for buying/selling pressure (a reasonable assumption given the fact that we typically see anywhere from 25-35% of volume traded occur in the final half hr of trade), it appears as if the volume is there in support of the buyers, despite the fact that from a more top down view we’re all scratching our heads wondering when the buyers will return…….but is this enough to take us higher???? It certainly doesn’t feel like it! Feels like we need a new round of stimulus to break to the upside….an auto rescue? Whatever the case, with Q3 reporting coming to an end and option expiry only days away, it won’t be long (days/hrs) before we get another big move to lead the way….

  30. Chuck Ponzi says:

    Barry,

    You need Chunk URLs for WP to fix Trick Style’s url from breaking your site:

    http://www.village-idiot.org/archives/2006/06/29/wp-chunk/

    Chuck Ponzi

    ~~~

    BR: I’ll pass that along to tech.

    Of course, people could always use Tiny URL . . .

  31. KJ Foehr says:

    I thought volatility was characteristic of a bear market, e.g., “we haven’t seen volatility like this since the 1930s.” And isn’t whiplash just another word for volatility? I had concluded this is “normal” and to be expected in a bear market like ours. So now it means something else? This is something different from the volatility we have experienced with increasing severity throughout the entire year? I don’t think so.

    The bear market continues.

  32. mark mchugh says:

    Options expire Friday, and the way I see it, if we don’t get a little rally here, the abyss opens again.

    The fun part for me is guessing how the “miracle” happens this time. I’ve become a big fan of the Charlie Gasparino “Breaking News” turnaround. Of course, nothing will ever compare to September’s short-selling ban, which completely pulled the rug out from under put holders. We don’t need anything that dramatic this week, just a nudge.

    In other news, the propaganda channel (CNBC) sunk to new lows today, when a guest brought up PPT market manipulations. In a way, it was enlightening. Becky Quick and Steve Lisman are still suffering delusions of credibility. That’s far more funny than sad. The clip turned up on Youtube immediately, and quite frankly, I think even Beck and Steve could smell their own crap.

    What broke my heart, was that the weasels carted out Art Cashin to fill the credibility gap. I’ve got nothing but love and respect for Art, but if you watch this clip, pay close attention to the eyes:

    http://www.youtube.com/watch?v=X06kz9dzXho

    Anyhows, look for a little miracle on Wall Street. And who knows, with the holiday next week, we might see the little pop continue to grow into a full blown sucker’s rally.

  33. dimeetrees says:

    We broke out of a previous downward channel on the hour chart and continued sideways trading after we hit our double bottom. Tt looks like we are going to go back to testing our double-bottom again I dont think it would be impossible to say that we might see another leg down, the consolidation we are seeing might come out to be a large move in either direction depending on the overall market reactions to the events in the coming weeks. With the christmas season coming up volatility seems to be picking up, it feels like the market is very sensitive right now…

  34. Mike in Nola says:

    A lot of managers on the sidelines looking for an entry point. Light volume, so some funds’ liquidation or buying is enough to mover the market. If we get a few up days that panic the fund managers with idle cash into thinking they are missing a rally, we could got a big move up as more pile in. They have to keep up with the Joneses.

  35. Mike in Nola says:

    Completely off topic:

    Just ran across a plausible explanation of why Flash will never be ported to the iPhone.

    http://blog.wired.com/gadgets/2008/11/adobe-flash-on.html

  36. VennData says:

    Just because enough loon balls talk about a PTT, doesn’t make it so. Like Obama’s birth certificate, Clinton’s black helicopters, the gov’t gold cartels, we never landed on the moon… the distrust of the MTM they re-enforce over and over makes you susceptible.

    When do the PTT unload their futures? Doesn’t that drive the market down?

    Put away the tin foil hat until you have evidence that there’s a Plunge Protection team.

  37. CNBC Sucks says:

    I know karen, leftback, Steve Barry, and VennData, but who are all these new guys? What the hell did you do with Mark E. Hoffer, Bruce in Tennessee, and wunsacon (wunsy), Barry Ritholtz? We had something like a family – as far as bickering faceless strangers on a financial blog can be family – and you, Barry Ritholtz, had to blow it by hosting your own blog and using that piece of crap open-source WordPress.

    Where were we? Oh yeah, the topic. What a ridiculous question, Barry Ritholtz. Don’t you watch CNBC, even with the volume off? There is an endless stream of bulls still parading on that network, all eager to call a bottom. Everytime reality – which has a left-wing bias, by the way – hits the stock market in the face, these bulls see “buying opportunity”. Unfortunately, I think the stock market will flourish under Obama through 2016 and then during the Rahm Emanuel Presidency from 2016 – 2024, so even the idiot moron permabulls will be lifted by the tide, even as these Don Luskin types fight the Democrats’ tax reform agenda every step of the way.

    Man, I cannot believe I went through a whole comment without writing the words “registered Republican”.

  38. Economics 101 says:

    Hey everybody,

    It has been a while. I had trouble with the log on. However, it’s great now. Well, the market will go lower. It is simple. “Leverage” is another word for “Margin Financing”. When the “outsourcing” of computer risk modeling is allowed…. the end result is extreme leverage on the non-fundamentally sound derivative CD “Swaps” or “Insurance” if you prefer. You have to admit a great “Marketing” job was done all-around. Question(Thinking)…. If there were less people around (Population) when the Great Depression occured (Industrial Economy, People with the means/mindset to survive)……. Since there are alot more people now (Financial Economy) would it stand to reason that with a low unemployment level say @10 to 15% and our special American social system (Unemployment Benefits and the like) in place could this lower rate now be just as financially devestating as the Great Depression rate of @25%?? I think it might be. I think an economic belief is dying. Monatary policy has its uses, but, when the pendulum swings further in one direction(Forced by a belief) it will swing back harder in the other. (Chicago School). Heterodox is the only way to go. Understand the systems as if it were a living, breathing entity. However, as always I could be wrong. I am still a student.

    Thanks all,

    Economics 101

  39. Patrick Neid says:

    Watching the action in Citi and UBS, to mention a couple, will be instructive if there is to be another shoe that breaks us through this glass support.

    Here’s a fun scenario. One or both go down for the count and we walk into a gap down that replicates Black Monday 1987 for a fat end of the day 20%, putting us around 700 on the spooz. In one final move we duplicate 1974, 1907, 1987 and most of 1929. Now that’s a market with a sense of history. I think this would qualify for a panic low!

    While I hope I wrong I’m a little concerned with the formation over these last six weeks. I hate when they give me so much time to establish a position with such an easily defined risk. The market is generally not this accommodative. But hey, so far so good.

  40. mark mchugh says:

    Venn,

    Do you mean the government website that tallies how many billions these clowns pissed away trying to paint the tape? January 22, 2008 was shaping up to be another Black Tuesday, remember? September 19, 2008 – SEC gives financials a completely bogus pop on options expiration day. They stole from people, yet no one even bothered to complain.

    “Subprime seems contained”
    “Our banking system is strong”
    “I need $700B or the world’s gonna end”

    We may as well have put Abbot and Costello in charge. They thought they could manage this crisis and no one would be any the wiser. I am sure they thought they could unwind these trades at a profit (that’s the idea behind painting the tape). This is a confidence game to them (like three-card-monte), and quite frankly, they’d have been derelict in their duties, if they didn’t try just manipulating markets before initiating an alphabet soup of rescue plans.

    And chicks dig guys in tin-foil hats.

    Painting the tape, done correctly, is a profitable trade. Unfortunately, this administration

  41. jakester says:

    support is about to give out in a big way. Check out the BASF news today. Some major shit coming down the pipe now guys.

  42. JustOne says:

    Well this may be a different view than I have seen in the responses above. A retired engineer’s mind is showing.

    What I see in this is analogous to the screech when a mike gets too close to the speaker. Sometimes it is just unpleasant but it is sometimes destructive of the speaker cone or amplifier components if it is allowed to grow too loud or go on unchecked for too long. Even if not destructive, it is usually beneficial to stop the ringing so that the sound system can return to “normal” function (even thought the ringing is also a normal characteristic of such systems).

    To correct the deafening screech, one must either move the mike away from the speaker (reduce the feedback coupling) or turn down the amplifier (increase the loss in the feedback loop) or change the time response (add delay) in the system.

    If the analogy of amplifier feedback system analysis holds, in the economic feedback system of the stock market, to correct this ringing (price volatility), the system must have a loss and or delay introduced to prevent excessive instability. This solution is simple in concept but it is very difficult in the complexity of real world politics to make such an adjustment. Here are a couple of approaches that could be considered (many others or variants could be defined).

    First one could introduce or increase the losses in the trading system. A small transaction fee (tax), for example, would change the economic incentive for computerized scalping and slow down the rapid churning of the market. While this would change the short term return, it would have little effect on longer term profits or losses based on fundamental business characteristics of the market. While I am generally against losses and taxes, it is a small price to pay for increased stability and the reduced damage that the current instability causes. The funds could be used by the SEC or other government agencies to do a better job of regulating the illegal but difficult to identify practices of naked shorting, pumping or manipulating prices by the “big boys,” etc.

    Second one could introduce a delay in the trading system. I this case no fee would be required but one would just require a longer holding period. For example any purchase of an equity, option, derivative or bond simply could not be sold for an appropriate period of time regardless of market conditions. For example, a “scalping” transaction might require a holding period of say 2 days before it could be sold or covered by a derivative or option.

    I can only imagine the turmoil and flames that would result if such proposals were introduced by someone with an ability to carry them out (as in Washington). The planes from N.Y. to Washington would be full of lobbyists, bankers and hedge fund managers trying to dissuade the congress or SEC from such actions.

    So folks, if you don’t like the solution, don’t blame the messenger … just enjoy the turbulence in what’s left of the system this volatility destroys. No need to jump on me … I’m JustOne with little influence.

  43. batmando says:

    “BR: I’ll pass that along to tech.
    Of course, people could always use Tiny URL . . .”

    Go to
    to put a TinyURL on your toolbar

  44. batmando says:

    oops I put
    http://tinyurl.com/#toolbar
    inside and it failed to show

  45. Andy Tabbo says:

    mark mchugh:

    I’m not sure I can agree with you about the PPT existing in the form of buying SP futures…but nothing would surprise me.

    But I will agree with you that governments actions in front of options expiration is amazing. It seems that there are forces at work to create very short term rallies in front of major options expiring. Also, I’m fairly certain there is someone “high up” employing Elliot Wave analysis at various points during the down drops. The most governmental interference came in the beginning stages of this move, almost as if they were attempting to prevent some Wave Threes from occuring or fully developing.

    For instance on 1/23 and 3/17, there was definitely some actions taken to prevent a full move from occuring….and then most notably on 9/18, with the announcement of RTC II and the short selling ban. On 9/18 we were definitely in the middle of “third of third” wave down…then BAM, Charlie Gasparino is on TV “Breaking News.”

    In turns out that no amount of governmental interference can stop the natural order of things. All they did on 9/18 was create further subdivision and a more dramatic decline later on.

    - AT

  46. mark mchugh says:

    Thanks Andy.

    I’m not willing to stake my life on it, either. I also understand that you can never tell people that you are rigging a card game. Confidence in a system is essential to making it work, and I don’t necessarily believe that nudging confidence here and there is evil. And hey, the September pop gave long investors the best exit point they’ll see for a long time (which I thought was nice).

    I think what bothers me most is the string of statements from Hank, Ben, Chris, and Walter. Either they are extremely stupid men (which I don’t believe… well, maybe Cox), or they’ve been lying. The media has failed to run them through the ringer for either incompetence or dishonesty, meaning said journalists are either incompetent or dishonest. Given how poorly they’ve all performed, they’ve lost the right to criticize any “crazy” idea tabled. When I see people like this scrambling to dismiss anything as “nonsense”, I’m very inclined to believe it.

    And I totally agree with you about the natural order of things. What scares me is I think you can make things even worse than they might have been otherwise.

  47. argh says:

    new lows are declining on each spike down, shows we are close to a bottom.

    HOWEVER, breadth sucks. shows we have not bottomed yet:

    http://stockcharts.com/charts/gallery.html?$NYAD

  48. Robertm73 says:

    Failure to rally from here and a triple test of the bottom. Down further from here.
    6400 or so before the end of the month. If GM goes down, 5300 or less by the end of the year. We fall below 5300. I would buy Amm0 and Can goods, cause the Market is pricing in a depression or worse.