Flash Crash Lows!
By Barry Ritholtz - July 16th, 2010, 6:00PM
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Here we are: Right back to the very lows of the Flash Crash of May 6th
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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.
July 16th, 2010 at 6:25 pm
The cell (sell?) phone towers on Long Island must have been burning up today.
July 16th, 2010 at 6:32 pm
I love these threads where we try to pick each other’s brains. Barry, I’m always trying to pick yours, indirectly, by the posts you put up. You put up a few posts about investor’s bearish sentiment recently that led me to think you were getting contrary/bullish amirite?
What was the volume today? Was there any conviction?
July 16th, 2010 at 6:37 pm
The Technical Analysis: Looking at the daily chart, the May 6th lows represent significant potential support … however, those lows have been tested multiple time and could weaken with further testing. Plus, this test comes in the middle of a noticeable down trend (lower highs, lower lows). If it fails to hold, expect to see SPX 950.
The Fundamentalist: Charts and technical analysis are medieval alchemy. Fibonacci was a morphine addict for God’s sake, so there’s no real significances in the May 6th lows other than it’s a price point. Stocks are cheap and earnings are going to be stronger than people think. Apple will blow out their numbers. I own copious amounts of AAPL from the mid-40′s, by-the-way. We go up from here, and even if we pull back, we’ll be up for the year by December. Bank it, Sparky.
The Elliott Wave User: I’ll tweak my count to be as backward looking as possible, but right now, I’m looking for a 3-wave, ABC pattern. But that might change if we put in a higher low here. Did I tell you I called the March ’09 bottom? Upon reflection in July of ’09, I adjusted my count and I actually nailed it. Yeah.
The Gold Bug: We’re screwed. Sell all fiat and buy physical.
The Investor: Flash crash?
July 16th, 2010 at 6:42 pm
Stop with the bad news already… I’m still building my ark, and I thought the latest prognostication said I have until Labor Day. Don’t tell me “the rookies manning the terminals” are going to send us into the abyss!
July 16th, 2010 at 6:43 pm
The Flash Crash low’s lasting psychological effect- Americans are still scared spitless and Europe is even more scared than that) is more profound than any technical significance…it lost the latter right about the first time the low was broken. And, as you must know, the scare it’s put into institutional is far more significant than any broader bearish sentiment.
July 16th, 2010 at 6:44 pm
Melodrama IMO!
SPY early May low of 104.50 is more meaningful to watch, which is also MA(322).
TBD.
July 16th, 2010 at 6:55 pm
This is the 3rd rally upto the 50 day SMA, that has failed (subject to next week performance). The count of TRHEE is an ugly number in technical studies, this means the BULLS have tried 3 times to ge over the 50day SMA and failed, SO EVEN the BULLS may give up and join the BEARS, and resume their BUYING around 900 or 850…Today sell off was very serious.
Caveat: A rally on monday or tuesday that takes price back to 1080 plus…would mean the BULLS are back in charge.
July 16th, 2010 at 7:06 pm
well- with our new circuit breakers in place- a flash crash is a thing of the past and the markets are as “solid as a rock” (cliche?)
and I for one plan on buying the dips all the way down-
that way I won’t be out of the market when the upside kicks in- however many years that takes
July 16th, 2010 at 7:09 pm
This market is following the 2004 playbook in many ways. Next stop a lower low for the year. Then followed by a sustainable rally sometime in the fall?
July 16th, 2010 at 7:13 pm
lol. “Earnings are great”.
Anyone that still believes these fake earnings manufactured under fictional accounting standards that can be utterly abused by fiat (suspension of mark to market by FASB a couple years back)…
And the fact that EVERY TOM DICK AND SALLY is telling you to buy Apple tells me that it is a better time to be SELLING it and taking profits versus buying it. lol.
The charts tell you everything you need to know and the long term charts do not look pretty.
July 16th, 2010 at 7:14 pm
A very important technical point. From here stocks are going all the way down, unless of course they go all the way up. Of course, they could just diddle about some more, which is what I’m going to do.
July 16th, 2010 at 7:58 pm
Nice the way it stopped at the 38% fib line on options exp. Friday. Magic Monday and some contrived crap over the weekend and we’ll be back up over the 20 heading to the 200. Earnings shmearnings, the bots/algos that run this outfit have no memory of what happened the day before. So it seems. Trade it as noise!
July 16th, 2010 at 8:06 pm
Jack Damn – Thank you for that!
July 16th, 2010 at 8:15 pm
speaking of AAPL..
http://finance.yahoo.com/q/op?s=AAPL&m=2010-08
those Calls are Fat, waiting to be Sold to the Dumb, and Happy..
July 16th, 2010 at 8:30 pm
Flash ! Emperor Ming awaits…. but he’s naked !
July 16th, 2010 at 8:31 pm
It is written.
July 16th, 2010 at 9:46 pm
a few weeks ago David Rosenberg said “DOW 5000, GOLD 5000″ . but he did not give a time frame.
July 16th, 2010 at 9:48 pm
Let’s see….lower highs and lower lows. Seems like we might be continuing our price discovery adventure!
Up/Down ratio was not good. When you look at the last seven days, shares sold have exceeded shares bought for four of the last seven–yet we levitated up. Poor participation. Financials hitting earnings but missing on the top-line… I expect to see more of this kind of earnings report–which won’t be rewarded. But it was a mixed earnings week with some good, and some bad. Same with econ numbers. BP gave us a lift with their people actually demonstrating they can engineer something that works…
Interesting times. The bulls are saying this is a normal breather in a normal recovery of a normal recession. Really??!
July 16th, 2010 at 9:59 pm
I have been using, very successfully I might add, a system developed during the last Great Depression.
When asked how to make money in the stock market, Will Rogers opined;
“You buy stocks of good companys and when they go up, sell ‘em. If they don’t go up, don’t buy ‘em!”
Lower highs portend lower lows…The ECRI is snuggling mighty close to the -10% slam dunk double dip zone.
July 16th, 2010 at 10:45 pm
Today was a big breakdown, making it look to me like SPX sees 960 before it sees 1100. If you believe Rosie we should be down there right now anyway. The action when the Russell is at 590 will be the tell if one should cover or ride it for fresh lows.
July 16th, 2010 at 10:47 pm
The bottom will be reached when CNBC is shuttered and Goldman Sachs is sacked. It will be reached when nitwits like Doug Kass are calling for Dow 2000 instead of calling bottoms.
July 16th, 2010 at 11:24 pm
I just read jack Damn ‘s post up top . He says”Charts and technical analysis are medieval alchemy. ” but then goes on to say” but right now, I’m looking for a 3-wave, ABC pattern.” Eliot wave theories.
I agree with it all Jack you’re right, Ill put the Tarot readings ahead of tea leaves any day dammit, bar none, stick a needle in my eye !
Everyone knows when you’re in the back of the limo you can be taken anywhere the driver goes.
Now…. don’t you feel more like you do than when you arrived?
July 16th, 2010 at 11:33 pm
(eyeballing my cerebral cortex) Anyone seen my car keys…? Anyone?
…and that’s MY “new normal”.
July 16th, 2010 at 11:41 pm
@Jack Damn
Great stuff.
July 16th, 2010 at 11:53 pm
Not my turf, but how did Doug Kass, who called the market bottom March of ’09 on Larry Kudlow’s show, qualify for “nitwit” status?! [Hope your IP address doesn't get sent to the far side of Pluto, "clinton"...]
July 17th, 2010 at 12:23 am
Maybe it was the other bottoms Doug Kass called leading up to March 09. He just called a bottom for the year last week. He also called one the month b4. Let’s see how many more bottoms he calls from here. Lol.
July 17th, 2010 at 12:29 am
Or the tops Doug Kass has called. Like the one last September and his call for SPX to close the year at 920. Nitwit sounds about right. Just another CNBC attention whore causing more harm than good.
July 17th, 2010 at 12:41 am
Are stocks really cheap? Relative to when? Once all the leverage and stimulus has seeped from the system, will it look cheap?
When more stocks look like Wellpoint (8p/e trail, 4 p/e forward) perhaps we will be cheap, but too many stocks are priced for recovery and a return to normalcy and it just isn’t that way.
Earnings don’t matter, it’s how you got the earnings that is being scrutinized. Forward P/E should be lower as the market is discounting a slow to no growth environment for many sectors. Top line growth will be rewarded as it will be a rare feat.
Technical analysis is not alchemy, it is your only window to see what the big money is truly doing, because they often contradict what they say with their actions. Without technicals you are blind to the truth of the money that moves the markets.
Rosenberg’s best analysis is economic, not stock market. He tries to translate econ into market but either gets time or price wrong. His economic analysis is impressive though.
Times like these will make legends, but legends rarely get to make another great call despite having their career defined by a great call. Look at the greats of the ’87 crash–one great call made their career, made them celebrity, but rarely did any of them hit another critical tipping point with such accuracy. This isn’t a slam on them, but a cautionary observation to be wary of those who guided you through 2008-2009 because they will likely fail in further meaningful market calls. The market is cruel like this. So thanks to Fleckenstein, Kass, Whitney, Roubini, Harrison, Ritholtz, Rosenberg, Bernstein, and many others, but in all likelihood they won’t be able to call “the bottom” or future tops. Except for Barry, perhaps with his Fusion IQ methods he may get it right, but I’m sure you’ll have to pay up as a client to know for sure…
Just remember the market is never satisfied until all are shown to be fools…
July 17th, 2010 at 12:52 am
Rosie is a dear. A deer in the headlights of real politik. Dougie Cass is a paid shill. Prechter is the primary profit motive for thorazine production. Shilling has been a deflationist since bi-planes wore high high button wheel skirts! Bless his heart. He IS sincere…I knew him when he argued that cartels were short lived (oil circa 1980) and lost his job on the street of dreams.
Anyone who believes that a measly few trillion dollars of impaired assets will bring down Western Money Thought hasn’t a clue about history. It’s all about freedom of the press and the Fed has the paper and ink. Velocity be damned. It will return when banks lend because the short (3 month to 3 year) curve is compressed as is happening now. The 10 yr and 30 yr rates decline in sympathy simply because institutions are the most stupid mammals since the cave men thought that mammoths were just big dogs…
Bottom line. Inflation is going to beat your brains out. If you are a deflationest, just send your money to me and Junior. We will pay you 6% per annum. We have a note lot and our cars are pristine and using FASB accounting principles, we only collect a modest 46% interest. Cheaper than Bankster rates.
Call Junior at BR 549.
July 17th, 2010 at 2:08 am
That overlay of the 30′s is a better match as we progress into this “Recovery”?
July 17th, 2010 at 3:08 am
This is a market that is driven by the consensus. Look at Euro crash when Euro touted as dollar substitute. Likewise 30 yr treasury rates took out 1982 trendline with 4.75% only to be smashed the opposite way. Today a substantial pullback in lackluster volume. Smells lower but plenty of cash and bond money to punish. We’re above the trendline on the lower highs. Friday move on options trading meaningless. Monday and tuesday tell the story. Wednesday the book is printed. Want to know if you are a market professional? Are you up this week? Are you up this year? This is a wicked market. The wolves are prowling. They are hungry. Pimco is right: Survive first. Get out of debt. Build cash. Be opportunistic. Watch volume not Cramer.
July 17th, 2010 at 6:41 am
Returning to the topic: Kilgore: Beware Technical Trap, Lower Lows posted here by BR on Wednesday…
Hey Thor how was that for timing?
July 17th, 2010 at 6:50 am
Like I mentioned yesterday the VIX, the fear gauge, continues to rock so someone thinks this correction has a basis
July 17th, 2010 at 7:08 am
Are the rich different? They are leading the pack in walkaways now.
Double dip into depression?
The article mentions additional stimuli, hell the unemployed aren’t even getting extended benfits anymore
http://www.nytimes.com/2010/07/17/business/economy/17consumers.html?emc=eta1
July 17th, 2010 at 7:32 am
@Ilya
If you think we currently are facing hyperinflation, then you must be scooping up real estate like crazy.
Since real estate now only requires 5% down that amount of margin beats out most other plays except maybe derivatives.
July 17th, 2010 at 8:31 am
If RE is weak now what happens with hyperinflation and sky high mortgage rates? Hmmm?
July 17th, 2010 at 9:01 am
@rktbrkr
According to Mike Shedlock / Mish
“If the dollar crashed to zero, the number of dollars it would take to buy a house would be infinite. There has never been a hyperinflation in history where home prices crashed and barring some war-zone anomaly, I doubt it ever happens.”
http://globaleconomicanalysis.blogspot.com
July 17th, 2010 at 10:34 am
Barry,
You are quoted in Barron’s.
http://online.barrons.com/article/SB50001424052970203296004575363290546036832.html
BTW, a fantastic article by Alan Abelson. Finally the Chinese gigantic real estate bubble driven by informal securitization (most foreign investors are not aware of it) by Chinese banks is getting exposed (most people still do not realize how under-reported and dangerous it is [US real estate collapse is picnic in comparison to China's])
July 17th, 2010 at 11:49 am
Also, the Sunday Times:
The Generals Who Ended Goldman’s War
http://www.nytimes.com/2010/07/18/business/18duel.html
July 17th, 2010 at 12:56 pm
“Bottom line. Inflation is going to beat your brains out.”
The question, of course, is when. After a long, brutal, deflationary slog, or much sooner?
You might as well say that springtime follows winter….
July 17th, 2010 at 2:04 pm
Is it just my perception or are prices across the board really suffering from downward pressure of declining demand?
Or to paraphrase Kris Kristofferson, “Deflation’s just another word for nothing left to spend.”
July 17th, 2010 at 2:42 pm
Instant “flation’s gonna get you
Gonna knock you right in the head
Better buy yourself hard assets
Pretty soon fiat’s gonna be dead
What in the world is in your dreams?
Laughing in the face of Keynes
Who in the world do you think you are?
A golden bar? Well, right you are!
But it all shines on
Like the coins, and the bricks, and the rings
But it all shines on
In everything, can you see what I mean?
O.K., sorry. I have to go lie down now. I think it’s a touch of Flash Crash Fever.
July 17th, 2010 at 3:36 pm
It’s only beginning of the 3th wave down, target price near 830 in S&P500, the global downside target – 700-730 in the middle of September.
July 19th, 2010 at 1:54 am
Evidence that the leg down from and of April represents a bear market kick-off:
http://a-d-trading.blogspot.com/2010/07/bear-market-kick-off.html