OPEN THREAD: Worst Day in the Market Since 8.11.10
By Barry Ritholtz - February 22nd, 2011, 6:00PM
Its likely a coincidence, but my travel history has the markets doing odd things when I roam. The 2000 top and 2003 bottom, the October 2007 highs while I was in some far away city; most infamously, the Flash Crash took place while I was airborne at 30,000 feet.
Hence, if the markets do something screwy this week, at least you were warned (Heh heh).
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Oops . . . My bad . . . sorry.
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Let’s use as an excuse to open the floor up to the crowd, and see what this might mean:
What does today mean to the next 3 – 6 months of market action?
Was this merely a twitch, a warning tremor, or the beginning of something much more ominous?
What say ye?
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February 22nd, 2011 at 6:30 pm
“What say ye?”
We say in future you must make your travel plans known within 30 minutes of the previous trading day’s closing bell ;-)
S&P bounce back to 1335 from here, then the predicted 10% correction.
February 22nd, 2011 at 6:38 pm
Actually I am not sure. Unless the market behaves like people I’ve known, as market leaders. I’ve known brilliant. I’ve known arrogant. But rarely the two combined.
My guess is it’s twitch. But it could become more. Maybe things aren’t quite working out how some arrogants expected them too. Or, they are having second thoughts.
On a positive note, maybe they are starting to think maybe they should do some deeper thinking.
If it’s not too late. But then again, how deeply do you have to think when your banking billions a day on commodities.
February 22nd, 2011 at 6:54 pm
Today felt like one of those pivotal days that often signal the start of a trend change. The proof will come in the next few weeks as we see how many “dip buyers” there are. The quality of a rally is where the proof is.
Of note was the lack of much response in the dollar. I think we are entering into a period of time where the value of the USD is seriously questioned all around the world. The USD is poised to drop into uncharted territory, and I think the recent action in Silver and Gold has more to do with USD weakness than the unrest in the middle-east.
We’ll watch and see……gh
February 22nd, 2011 at 6:54 pm
Barry, I visit Big Picture more often these days than any other site. I’ve also begun to like “The Browser”. Your posts always make a very interesting read. They are very thoughtful.
I picture a tumble not just because of the series of demonstrations in the Middle East, but because of Steve Job’s health is still kept off the radar. I sincerely wish he is doing okay. Any unexpected bad news on that front is sure to topple AAPL in the near term and so will the entire Tech-sector. Problems in the Middle East, Potential problems in the overheated tech-sector, Housing prices still being on the decline, Not too many catalysts to increase the number of available jobs…. Wow, the pessimist in me seems to have taken over. We’ve had a beautiful run from March 6th 2009. The famous “Sell in May and Go Away” might actually hold good for 2011. Just my hunch.
February 22nd, 2011 at 6:55 pm
And then I see the Bill Gross quote on the “quote of the day”. !!!
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BR: BTW, the QOTD is utterly random — I populate the site with quotes, but “Shantz WordPress QOTD” plug in selects what shows up when.
February 22nd, 2011 at 6:56 pm
What I’d like is for the market to get down to 1220-1250 and shake out the weak riders of this narrow channel we’ve had since Bernanke opened his mouth in WY… I’d like some fear of EM due to Africa/Mid-East contagion and some questioning of Euro sovereign debt in someplace like Portugal or Spain–right into earnings season. Then, I’d like the earnings to rip it above expectations and whip saw an overly bearish crowd off the ride…then I woke up.
It would seem that what is happening over in Africa/Middle East is ultimately a good thing, despite introducing uncertainty, volatility, and general fear into the mix. Sometimes what is “right” is not necessarily in the U.S. best interest. There is a reason we set up autocracies and banana republics all through our checkered past: our self interests. Yet, when we hold ourselves out to the world as the bastion of freedom and democracy, we kind of paint ourselves into a corner, don’t we? What we mean is, “come on over here and enjoy freedom and democracy–if you are college educated and a professional”, not for you to set up your own democracy! Ooops.
Well, what we need and what we get are two different things. Happens to be that way in the market too… Had 3/4 of a years returns going into Friday–you mean you didn’t book ‘em and buy t-bills to ride out the remainder of the year?
February 22nd, 2011 at 7:05 pm
The Dow was down 166 when Egypt first erupted. The loss was erased within two days with significant upside. The fed won’t allow this to crack. Look for the S&P to take out all-time highs by June.
February 22nd, 2011 at 7:32 pm
I am short the market, long the bonds since last week. But agree the medium term uptrend is still intact.
February 22nd, 2011 at 7:39 pm
you are grounded
February 22nd, 2011 at 7:56 pm
First and foremost, big thanks to B.R. for the heads up. And it’s good to know that I’m not the only one who travels during the days of major market reversals (or is it the other way around?) – the days when i can participate in the market the least turn out to be the days of biggest missed opportunities.
Also, I’d like to ask the following: yes, the moves was substantial, and yes, the volume was higher than during the recent days. But have we really become so “soft” that 2% S&P drop causes us to react the way we (the market participants) used to react during the 5-7% drops? What the heck did the Greenspan and Bernanke “puts” did to us??? I’m not even mentioning that the market has doubled in less than 2 years!
February 22nd, 2011 at 7:58 pm
load high the hay
sell in may
stay away
(it has worked before)
February 22nd, 2011 at 8:45 pm
BR: I don’t suppose you could give more advance warning of your travel plans? If we’d known, we could have pegged the market reaction instead of having to say that we didn’t know which day during February that a correction might begin!…
February 22nd, 2011 at 8:54 pm
I would say that an undershoot of the uptrend, and the fib number of 1303, on a gap down opening rotation, might flush out weak hands. We’ll know if a new low hits after 10:30 (ish).
The Libyan Madman is a caricatur of himself. He is capable of anything, sadly…perhaps a tragic traffic accident is in order.
Power to the Libyan people. Enough already.
February 22nd, 2011 at 9:36 pm
Thus far, Ben Bernanke has provided us with an impressive display of determination and power, carrying the stock and bond markets far above the busted and broken corpus of the Bananamerican economy.
If oil prices continue to ratchet higher, and employment continues to be punk (never mind the unemployment rate — it’s the number of workers and the fraction of the work force that is important), and the states continue to grind themselves into dust in the absence of wage-related taxes, with a Congress and President determined to fund the goobermint on tax cuts and wishful thinking … I think we might just begin to see the limits to the Power of the Bernanke — and make no mistake, there ARE limits. There are limits to everything.
It might take until the summer or fall, but sometime this year the shit’s gonna hit the fan.
February 22nd, 2011 at 9:38 pm
I was looking to see cognos here, telling us all how it’s all good, the pause that refreshes … onward and upward from here … buy the dips!
February 22nd, 2011 at 10:21 pm
It’s a bit early to tell, but I think we’re looking at the start of a correction. We’ve had a great run since September, but it’s been feeling like the market had been carrying itself high simply on momentum and earnings since January. There’s a lot of uncertainty brewing with the events in the Middle East, pension battles and a budget fight at the Federal level. Not to mention the pressure companies and the economy will be under from higher input prices, while consumers still aren’t willing to pay a whole lot more. Once again there’s nothing decisive yet, but there’s enough going on to put some bulls on the sideline and embolden the bears.
February 22nd, 2011 at 10:27 pm
uh, so what day are you returning…. Also, I’d like to schedule my vacations in tandem with yours.
Enjoy the sun and have a great time!
February 22nd, 2011 at 10:31 pm
Let’s wait to see what Apple announces Thurs. and if the iPad 2 will be revealed on time ;)
February 22nd, 2011 at 11:00 pm
95% long. Stops set with very short leashes. I hedge with index puts.
My eyes are on the 10-day moving average. If the S&P closes below that for a day or two and can’t break out, sell.
I don’t personally think Libya is going to be the kickoff of a major correction but I’m watching it closely.
I expect a pop tomorrow but we’ll see. I’ve been wrong before but I didn’t sell out today and don’t intend to over some obscure view of what is going on in Libya (a good thing if it is democratic revolution).
February 22nd, 2011 at 11:17 pm
“Likely” a coincidence? Yeah, probably.
Broad market indices will not make new highs until after touching 200 day simple moving averages.
February 22nd, 2011 at 11:31 pm
http://www.llrx.com/features/deepweb2011.htm
February 22nd, 2011 at 11:36 pm
I missed the beginning of the run-up, venturing long in June 2010, and moved over to junk bonds Dec. 2010 (a slightly safer form of equities).
There’s still a looming double dip, and structural problems that won’t be easy solve, all summer and into fall. Ultimately, democracy works, but it’s damn messy in the short-term.
Buy on the big dips, like 5 to 10%, not this little hiccup, on Tuesday. Watching Wisconsin w/interest.
February 22nd, 2011 at 11:45 pm
Barry, three views from folks I think you read and folks I suspect you don’t.
The best TD folks have this as at least a confirmed corrective event they were expecting after 1343 and the 9-13-9. Kevin Depew was his most bullish in 10 years or move a few months and 30% ago, so there is some reason to give a bit of credibility in the TD views of the best.
Toby Connor (Gold Scents?) was calling for a great depression crash beginning 2 weeks ago. He was calling for a huge last rally a few months early last summer and that eventually happened, so there is also some reason to give a bit of credibility in the his view.
Dan of an Elliott Wave site I won’t mention has a bearish bias (he’s a great read though), and he has his primary count for this as the first move of a gigantic wave III down. He thought it had started last April/May though, and is now calling that correction the “B” move of a three wave corrective II pattern the “C” move of which just ended.
I know that you think there isn’t excessive bullishness out there, but my challenge to you would be to name more than 1 or 2 credible or semi-credible folks who are solidly 100% short the market. It seems that there are huge numbers of levered positions that are “all in” long with the thinking that you don’t fight the Fed, even as the Fed’s effectiveness has been called entirely into question.
February 23rd, 2011 at 12:02 am
come on guys…what are we doing here…it was one day
market predictions are futile…kind of hard to build a profitable trading system around “feelings”, “hunches” and this other stuff I see posted…you’d be better off to flip a coin, or throw a dart…
listening to some of these posts, I fell like I am watching a demolition derby, and the drivers are blindfolded… all taht being said, you guys are the best!
tune out the noise…trade your system…
February 23rd, 2011 at 12:25 am
I say another 75% down and there MIGHT be some good buys!
February 23rd, 2011 at 1:32 am
I’m out to defend those non-existent inflationistas from 2007 and 2008. Here we go again. I got to go to work everyday and watch people bitch about gas prices and watch them set up carpools. I predict consumer cofidence will go down.
We get pissed at the pump.
http://www.calculatedriskblog.com/2010/04/consumer-confidence-unemployment-rate.html
February 23rd, 2011 at 1:44 am
Maybe the old guys (Mubarak, Muammar, Al Khalifa, … ) started raising money to buy retirement homes..
On a more serious note, Libya falls, brings down Italy, wakes up PIIGS. We all start talking about eurozone again.
February 23rd, 2011 at 6:57 am
Completely OT, but at least your Knicks get carmello, he really is a class act. Great player and person. Much better than the “other” choice.
February 23rd, 2011 at 6:59 am
@ Rip: in answer to your question “But then again, how deeply do you have to think when your banking billions a day on commodities.”
i wish the banksters would consider the arguments espoused here
http://questioneverything.typepad.com/
February 23rd, 2011 at 7:18 am
If we get through the year without a major oil disruption from the Mid East, we will be astonishingly lucky.
The unemployment rate in Saudi Arabia is between 10 and 25 percent. The percent of people there living below the poverty rate is 40 percent. The senior Saudi leadership is all in its 80s and ailing. The Eastern Province is heavily Shi’a and is watching events in Bahrain.
There’s speculation that Libya may divide into three semi-autonomous regions or nations, if it’s lucky, reverting to old tribal loyalties. Saudi Arabia was unified by the Saud family. (It means “Arabia of the Saud Family.”) Theoretically, it could divide into three separate nations or be consumed by Jordan and Iraq. Pure fantasy.
Egypt is a mess. Iran’s not far behind, and Bahrein which has a large Shi’a population is liable to inflame Iranian passions.
Let’s remember that if major trouble breaks out in Saudi, it’s long been believed that the Saud family has a doomsday device in place to destroy its refineries and pumping stations. Totally insane, if true…. http://www.huffingtonpost.com/2005/05/09/huffington-post-exclusive_n_480.html
February 23rd, 2011 at 7:37 am
as long as oil stays above $81.00 you want to be long…
the close over $93.50 yesterday to a 2 year high sets up for a move higher…
February 23rd, 2011 at 8:24 am
BB has been getting flak for rising food prices (and political turmoil) resulting from QEx and yesterday grains were market down while oil and metals soared. Has the scope of the Fed’s market management expanded to forcing down food prices while other commodities rise? try to prevent other 3rd world overthrows?
February 23rd, 2011 at 8:27 am
Ben Bernanke is like Muammar al-Gaddafi;
he thinks he IS the economy just like Gaddafi thinks he IS Libya., until the people wake up and prove them wrong. It doesn’t matter who’s at the top. Off with their head!!! and DO3600.
February 23rd, 2011 at 8:32 am
Give us all a heads up if you make travel plans for a long trip on 12/21/2012.
February 23rd, 2011 at 8:35 am
This market wants to go higher. (short to medium term trend up)
Yesterday was a catch-up correction (ie monday markets closed) and a minor hiccup. Today should be sideways.
On Geopolitical events: Reading the tea-laves points me to the Tel Aviv exchange — it should be a decent risk barometer for middle-east risk. Its marching upwards and neutral-to-positive
http://noir.bloomberg.com/apps/cbuilder?ticker1=TA-100%3AIND
my gut says that the market is overdue for a correction (the upward channel is amazing) but it will take something big to get into full risk-off mode.
February 23rd, 2011 at 8:36 am
The truth can not be undone at this point. Somewhere out there reality is getting ready to smack every long wight in the face. I can’t wait for that day so I can give you all a BIG….I TOLD YOU SO…..
February 23rd, 2011 at 8:37 am
ps. Sustained oil prices above $90/BBL WTI will be a drag on the economy… so we could see more labor pressures, and dips in consumer confidence. Also margin pressure due to commodity costs will start to reverse the PHAT margins companies are now enjoying. This will be bearish (ie resistance) in 2H2011 IMHO if commodity prices stay @ these levels…
February 23rd, 2011 at 9:18 am
Barry,
you are clearly a precog. Somehow your psychic mind is finding the most stressful days on your calendar and inspiring you to vacate to less stressful environments during those times. This is an innate survival skill and maybe you should look up people who test these things and see if you have any abilities. You never know, you could be Israel’s next great prophet ;) Wouldn’t that be funny
Maybe your brain just knows when you’ll be interviewed on cnbc and it does anything to avoid it :)
February 23rd, 2011 at 11:52 am
LOL!
GFI just quoted at 17.76
Who says Mr Market doesn’t have a sense of humor
February 23rd, 2011 at 12:10 pm
BR:
its only midday, but market is down again. what does another down day after the big drop yesterday tell us?
over the last year, how many times has the market followed up a big drop with another down day?
just curious.
February 23rd, 2011 at 4:09 pm
Here is a scenario.
This is all still about liquidity and leverage.
Postulate that the Street (widely defined) is short precious metals – and possibly softs and base and long equity, but wanting retail to take them out of the latter.
Middle east continues to rock and rumble. Oil spike triggers inflation fears and growth confidence suffers.
China increases its buying of precious and reals, squeezing the Street shorts – liquidity crumbles, leverage crooks her evil finger – and the pile out of equities begins.
Hello 1190 on the 500. Crack the champers on QE3.