Yet another intra-day reversal does not bode well for stocks.

This morning, I laid out the various oversold condition. All of them suggest we could bounce; none of them make it a sure thing.

Selling will continue until it exhausts itself . . .

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.

60 Responses to “No, the Cavalry is Not Riding to the Rescue”

  1. Concerned Neighbour says:

    Extraordinarily low rates until “at least mid-2013″. Smacks of grasping at straws, or outright desperation. This is the Fed’s way of saying “we’re screwed for the foreseeable future”.

  2. Concerned Neighbour:
    You are 100% correct about that. And it appears that “Helicopter” Ben doesn’t even read his own old writings.

  3. patient renter says:

    What exactly did market watchers expect from the Fed?

  4. rktbrkr says:

    Or maybe forever!

    3 Fed dissenting votes

  5. Ny Stock Guy says:

    Nice rally so far.

    Get out while you still can.

    The Fed can’t do anything else to help. It’s over.

    Even Davy Crockett couldn’t save the Alamo.

  6. nofoulsontheplayground says:

    It’s a little difficult to compare this selling with October 2008 because in fall 2008 short sale bans were put in place on financials, and something like 1,000 listed issues got the SEC to classify them as financial stocks by mid-October.

    However, the extreme oversold condition remains on the major indices. Looking at individual issues, it appears we may need to see AAPL drop some more before we get a more lasting bottom in the broader market. It’s quite rare for us to see a major washout with indexes trading at calendar year lows while a huge stock like AAPL is around the same level it was a month ago. Usually you get synchronicity when the lows are in.

  7. Hey, at least we don’t need to worry about another housing bubble!

  8. Petey Wheatstraw says:

    How the Common Man Sees It Says:

    “Hey, at least we don’t need to worry about another housing bubble!”

    Not until the last one finishes bursting, anyway . . .

  9. Ny Stock Guy says:

    Jezuz H. The 10 year is almost back to it’s ’09 lows.

  10. Junior says:

    I guess I should be surprised that anyone is surprised about what the fed said. What were they going to do? Raise interest rates?

    But I’m getting used to the new normal, which is that the bulk of conversation and the conventional wisdom about what is happening will be 180 degrees wrong.

    This truly the era of the false narrative.

  11. AHodge says:

    ah well stopped out worst of my morning buys..just a little off
    still trying to buy a TIP top
    im with NYstock guy talk abt overdone?
    will amuse and distract from doing something really stupid
    still cant short much..

  12. dead hobo says:

    BR decided:

    Selling will continue until it exhausts itself . . .

    reply:
    ————-
    Yup. No Fed bubble blowing at this time. Just an admission that the economy sucks and will continue to suck for a long time. Also, an implied admission of QE1 and QE2 partial and/or substantial failure. Toadies and teapartiers can argue this out.

    The only way to prevent the suck from continuing will be for the CFTC and its world analogs to remove commodities from asset class status later this year and allow market pricing for commodities to prevail. If they rise, then this will create jobs in energy related fields. If they don’t rise then this will create jobs everywhere else. Win Win.

    The bubble won’t be over until the final fart sound from the flatulent balloon.

    S&P 900 is my thinking.

  13. AHodge says:

    meaning buy puts sell a IP top

  14. DebbieSmith says:

    But, as shown in this article, why did the Federal Reserve state that the economy and stock markets were fixed after just 3 short months of QE2 back in February?

    Apparently the economy wasn’t as “fixed” as the Fed was attempting to lead us to believe.

  15. gordo365 says:

    Fed could assess a special “fee” on those holding savings or money markets. Make the elderly fixed income crowd move their money into riskier assets to move prices back up.

  16. TimmyB says:

    If the Fed really wanted to prop up stock prices, it would find some way to prohibit Barry from traveling.

  17. tradeking13 says:

    So, they expect the economy to suck through at least 2013?

  18. whskyjack says:

    More fun than Vegas!

    Hand me them dice, I think I’ll roll one more time.

    ;-)

    Jack

  19. machinehead says:

    Hard to see how QE3 can proceed with three dissenters.

    Collegiality did not prevail.

    The Bernank is facing a brewing mutiny.

  20. Bokolis says:

    The superball bounces indicate that selling can and will take bathroom breaks? It’s either that, or there was more buying into the drop than you think…thanks to Ben, the powder was/is there for it.

  21. whskyjack says:

    What should be obvious even to the fed is that they are powerless to turn this thing around. It is going to have to be a political solution and that ain’t happenin’ either. I’ve got a great recipe for road kill chili if anyone is needin’ it.

    Jack

  22. nofoulsontheplayground says:

    This bounce reminds me of the first Oct. 2008 bounce off the SPX 850 area. That was good for about 15% off the lows, but that was in a higher volatility environment than we have currently.

    Like Oct. 2008, this bounce is after a policy announcement.

  23. T_S says:

    I see a pretty bullish reversal here. Made new lows in the index(es) and off we went.

    Course I miscalled the hammers last week. They looked good, too.

    Looks like a strong move today. Anybody’s mind changed?

  24. Orange14 says:

    Just wait 30 minutes, see the stocks go up; wait another 30 and see them go down; just like the playground teeter-totter!

  25. Ny Stock Guy says:

    No.

    But it’s a better day than I thought.

  26. Orange14 says:

    Since I didn’t heed Barry and fire Bruce Berkowitz, I can’t wait until tomorrow’s teleconference with Bruce and Brian Moynihan!

  27. Trevor says:

    nofoulsontheplayground says: “It’s quite rare for us to see a major washout with indexes trading at calendar year lows while a huge stock like AAPL is around the same level it was a month ago.”

    I suspect you did not take into account the huge rise that came about a month ago as a result of Apple’s earnings. AAPL IS down with the market.

    As to other tech. stocks, I’m not in a position to know/comment.

  28. diogeron says:

    OK, BR, what does a reversal of a reversal of a reversal mean?

  29. We know one thing about today. A healthy market doesn’t move 500 points in 90 minutes. That’s just insane.

  30. Super-Anon says:

    “I see a pretty bullish reversal here.”

    This kind of rally alleviates so much margin call pressure.

    The hedgies can stay in the game and try to drive it up now if they have the confidence and their investors don’t bail.

  31. Concerned Neighbour says:

    Actually Phil, it was 610 points in only 75 minutes or so. The market is so broken.

    This is why I’m not a short-term trader. If I had traded the Fed statement, I would have shorted. To me, that was a very negative announcement. Why the market would choose to rally so hard after that is beyond me.

  32. super_trooper says:

    The sky is the limit.

  33. Super-Anon says:

    “We know one thing about today. A healthy market doesn’t move 500 points in 90 minutes. That’s just insane.”

    True, but I think we had tons of compulsory selling from margin calls. When people are forced to sell when they don’t want to that’s when you can get huge turnarounds that go on for a while.

  34. Robespierre says:

    @Concerned Neighbour Says:

    “Fed’s way of saying “we’re screwed for the foreseeable future”.”

    Not really I think is more like he is feeling more Japanese these days.

  35. AHodge says:

    not bad
    big guys beat up the little long initiators after morning pop
    but had to square at day end
    i hang in w little long into next week

    orange you dont need barry to fire Bruce what a drooling delusional moron
    can i borrow some bank stock to sell to him?

  36. AHodge says:

    bruce interviewing moynihan…
    who obviously only wants public questions from a total stooge….
    in this case wearin XXX bucks of bank stock

  37. carleric says:

    Although I don’t have access to the specific info, it looks like the brainless computers were at it again….pretty quick moves for anything else I would think/guess…..Bennie is now borrowing from our Canadian neighbors…seems to be out of any fresh ideas and is facing a mutiny of sorts…too bad our Congress doesn’t look northward

  38. wally says:

    And which refversal would we be referring to? The midday rollover and drop or the mid afternoon spurt upward?

  39. wally says:

    “If I had traded the Fed statement, I would have shorted. To me, that was a very negative announcement. ”

    Agree. It clearly says” We see nothing good for two years”. The only upside is it says the US can still finance on the cheap.
    I think it is an experiment by the Fed to see what happens. I don’t think that seeing experiments at this stage is confidence-building.

  40. NMR says:

    Whether the cavalry is riding to the rescue is still to be proven one way or the other. In reality these votes are for the birds if the Chairman wants to do something he can do it. It was a nice rally(stronger than anyone here expected I’ll bet) but the margin comments aren’t that far off the mark. I reckon we’ve got another couple weeks of this. Stock up on Pepcid.

  41. Orange14 says:

    @AHodge, BAC is up 16% on the day; go figure. There will be the opportunity for public questions on tomorrow’s call so you can listen in.

  42. rktbrkr says:

    Closed up on higher vol.

    Fed delivered less than the mkt expected (I thought) and the market swooned for an hour and then exploded. Unfathomable!

  43. nofoulsontheplayground says:

    Trevor, when there is a true market washout bottom, few stocks are spared. This low has the hallmarks of an intermediate bottom and oversold bounce like we saw in October 2008.

    I have yet to see a stock hover like AAPL did this week at a true market bottom. This suggests this is an oversold bounce off a low that will see a re-test in the future, and that re-test should have AAPL much closer to a 2011 low regardless of its fundamentals.

    At the 2002 lows many Nasdaq stocks were selling below cash. In a selling climax stock fundamentals yield to liquidity needs and overall fear.

  44. river says:

    How about “selling will continue until morale improves.”

  45. It seems to me that since the U.S. economy is so totally based on consumer spending here, since we don’t make much stuff here, and don’t export much, and what we do buy here is imported from China, that the stock market is a terribly inefficient economic flagpole. Employment nos. are probly a lot better metric. In northern states, like Maine, where I am from, most people are now bracing for $3.80-$4.00 a gallon heating oil prices for the duration of the fall and winter, translating into heating costs of $700-$1,000 a month from October to next March. As such, we are now basically not going to spend any money from this point forward (no restaurants, no concerts, no extra food purchases outside of essentials like potatoes and milk, etc). I don’t think my family is alone in this calculus, and it has to translate into an overall contraction of retail demand for the next 6 months when multiplied by millions of regular ‘Mericans in the northern tier. Even accounting for those fools who want to max out their credit cards in order to maintain the illusion of no problem. Just a thought.

  46. DeDude says:

    The end of the day was definitely machine trading – no human would have done that. The have them coded that if we get X amount of drop in Y amount of time then it is time to buy, and if the market is turning after that kind of drop then they are coded to go heavy in before the “drop” has disappeared. Will be interesting to see how they coded for “sell again and harvest the profit”. We may be in for a period of “battle of the robots”, particularly if the human traders mess it up by deciding they can go in and participate in the fun.

  47. MikeDonnelly says:

    Didn’t we have many multiple 500 point move days before the last recession ? Hard to believe some comforting words from the Calvary CAN save the day. It’s the week and months I’m worried about.

  48. DeDude says:

    The way I read it is that Benny disappointed those who expected some real QE3 like action, that triggered some serious selling and the markets dropped. But that drop reached a place where some of the biggest bots had been instructed to start buying, and their buying triggered a lot of other bots to get in before the party is over. Question is how much more buying will the bots do, and when will that bot buying be overwhelmed by humans who think that this is a great opportunity to get out at the hight of a bounce.

  49. ZackAttack says:

    That was insane. At least I will never understand the underlying logic of moves like that.

  50. rktbrkr says:

    Monday retail outflow biggest since Flash Crash

    IF there is a PPT would they use machine trading?

  51. WaveCatcher says:

    What, no talk about the PPT? Or maybe now the PPT owns the biggest bot?

  52. wally says:

    “Didn’t we have many multiple 500 point move days before the last recession ?”

    The Calculated Risk blog has a post up showing exactly that.
    These extremes – both up and down – are characteristic of a panicked, downward market.

  53. Winston Munn says:

    Warning: market crashes come in oversold markets accompanied by high intraday volatility.

  54. dead hobo says:

    Upon reflection, I have no idea what to do tomorrow. I need a time horizon of several weeks for a plan to register and what I see are low rates which encourage risk and robo trading, poor economic forecasts, Europe debt problems, and no place else to put cash.

  55. I’ll continue playing the longer term trend with my proprietary sector rotation strategy. It’s worked in the past and I’m confident about the future. No need to make snap decisions because of a little volatility.

  56. Warning: market crashes come in oversold markets accompanied by high intraday volatility. — WM.

    The stability of houses of cards is inversely proportional to their height?

  57. constantnormal says:

    What a pity John Belushi is gone. He could do a great Samurai Fed Chairman skit.

  58. Silversem says:

    I am into (junior) gold stocks for the long run. I am hoping for a scenario like we saw in the seventies and in 1980. Gold stocks went to the moon and beyond back then.

  59. DeDude says:

    The machines have been programmed for trading the bounce back after a 15% correction so that’s what they did. There is no price protection team just a bunch of algorithms programmed to deal with the statistical probability that after a 15% correction markets will likely go higher in the short term – so traders can book a profit by holding a hand under that number. Today we will see when and how the machines have been programmed to book that profit. A lot of stops and margin calls could feed on any additional substantial fall in the markets and who knows where the next “correction floor” has been set by the programmers.

  60. victor says:

    @ Concerned Neighbor: Extraordinarily low rates until “at least mid-2013″. Smacks of grasping at straws, or outright desperation. This is the Fed’s way of saying “we’re screwed for the foreseeable future

    You got it right, just to clarify, as Wally already attempted though, I think that the US Treasury via the Fed is wantonly telling ALL savers (you, me, institutions, Sovereigns, incl. China); screw you, I´ll pay my debt not only in devalued dollars but with low/negative interest rates and you all have NO choice but to accept this because I´m (still) the big Kahuna around here!

    Oh yes, it´s driving actors like Putin nuts, but ¨he don’t count¨ and the Chinese will choose this treatment any time over the spectrum of hundred millions unemployed there. By the way with 300 million practically homeless (but employed, making peanuts for salaries, they live in enormous barracks/dormitories) the Chinese Communist Party knows what´s good for them: shut up, little noise as possible and eat whatever the US allows you to, at least for the foreseeable future! They must be gratified that boss Berdnake clarified this for them. After mid 2013, we´ll see….