Monday, October 17, 2011

Panic De-Selling

Just getting caught up on reading things. Forgot my phone charger today and thus my battery devouring Droid phone was about dead by 10am.

Panic De-Selling
Today markets gave back some ground but it really does not affect my topic tonight. The vicious rally seen over the past week or so has pulled major indices back from just about bear market territory to close to even for the year. Digest that little nugget for a second.

And I think there exists a chance for an even more extreme move.

I was thinking about this late last week and it's not exactly a novel idea. Josh Brown touched on it this morning:
Futures Higher as G20 Leaders Demand Euro Zone Not Ruin the Q4 Rally
Everyone needs a rally this fall. Everyone.

They're making it happen. They'll tolerate no distractions. Lukewarm data points will be treated as positive data points and positive data points will be received orgasmically. Negative stuff will be tossed over the market's shoulder and dismissed as "priced in already". Watch the shift in psychology - "just give me a reason to buy, man, just give me a reason."

It can be strange to see but markets demand several weeks (months?) of bad data before they will even consider a slow down is possible. After a market drop though, the slightest "better than expected" or other minor positive data point will be seized by the balls as proof positive a rebound has arrived. The power of positive thinking I guess.

Below is a chart of the S&P 500 daily going back to July:
In late July when things started to tumble there was plenty of debate and discussion about various key levels of support on the way down. There are a bunch and everyone comes up with numbers differently. I have my major support levels marked by lines on the chart. You will notice the fall went right down and through 3 major support lines and stopped at the 4th(around 1120). That was Panic Selling. Get me out NOW, not later.

The big drop felt different to me than other corrections when it started, just more sinister. The latest market rally has my attention as well. It's a bit stronger and more pronounced than other attempts.

And this is all about psychology now. Fear of missing out on a huge run is palpable out there. Time is running out on the clock this year and performance has been flaccid. If the S&P stays above 1230 another time it could cause a rush back into the market.

You have the gunpowder that is performance anxiety. You have some jet fuel that is some kind of Euro fix (delay Greek debt haircuts, kick can, use small soothing words on markets). China could ease which is more scary than good but for the near term will be kerosene. All you need is a spark.

Maybe earnings season will go well this time around. Maybe the FED drops a bomb. Who knows, it won't take much. I think a run to the 200 MDA could happen fast (1275 - 1280) and if it does the chasing could be Lord of the Rings epic at that point.

If you are a follower of markets, you can feel the tension now. The only pent up demand in this economy is the desire to buy stocks going higher.

Will it happen? CROX and IBM did not help things tonight after the bell. The Occupy Wall Street (I will have much more on this during the week) thorn is starting to draw blood. Europe may screw the pooch once again. Risks abound as well as common sense but here we are anyway a spark away from a mad rush back through the exit doors many ran out not long ago.

And that is Panic De-Selling.

Have a good night.


David Batista said...

You know, I never mentioned this before . . . but you have a very smooth style of writing that is easy even for this admitted economic know-nothing to follow.

I do hope you're right about the way things are trending. I think we can all use some positive reinforcement right about now.

Great update, my friend!

getyourselfconnected said...

Thanks David! I think it could happen, and maybe that is "good" near term but crazy mves hardly are ever sustainable. We shall see.

Jennifer Hillier said...

He's a great writer, isn't he, David? He'll probably write a novel someday about how robots and cloned DNA caused the next massive stock market crash, and it will be an instant bestseller, and I'll have to look at it in airport bookstores every time I'm traveling to a conference.

(And if you do write this book, GYSC, I'd better get credit for the idea.)

GawainsGhost said...

Panic de-selling?

Let me tell you something. I got an assingment for a historical broker's price opinion, dating all the way back to 08-02-11. That was just a few months ago.

I did the research, looked up the property on Land Title and Carson Maps. But there is no record of a listing or sale for this house on MLS going back five years.

I drove to the house to take pictures. There were already sheriff's notices on the door, two of them as a matter of fact.

Hello! Ordinarily, it takes at least six months after the original notice of default before the sheriff delivers an eviction notice. This house barely sold a little over two months ago, and it's already being foreclosed on.

They got the sheriff delivering eviction notices before I even get over there to provide a second price opinion? Something strange is going on.