Halloween/"1929 Crash" Anniversary Thoughts From Art Cashin
Via UBS Financial Services:
Assets Go Their Merry Way Yet Again – The U.S. dollar got dinged pretty hard, Thursday, as confusion about the scope and efficacy of QE2 continued to bubble. The reaction to the dollar dip among other asset classes was anything but uniform. Gold went up but stocks went down. Treasuries rallied but oil was flat to soft.
It didn’t start out in that confusing fashion. At the opening, stocks were firm responding to the weak dollar, a dip in initial claims and some decent earnings reports.
The opening rally took the S&P straight into the 1188/1191 resistance band. Ten minutes into trading, the S&P hit 1189.53 and stopped dead. Bids began to disappear and stocks began to sell off. The selling accelerated after 10:00 with stocks quickly and sharply moving into negative territory.
Stocks stayed in negative territory from early morning into late afternoon.
In the final 90 minutes, the techs got back into mild plus territory but the Dow never quite made it.
Volume dipped, which hinted that markets may have turned cautious and indecisive in front of next week’s election and FOMC meeting. We’ll know better if the same wishy-washy action continues today.
Ghoulies And Ghosties And Tax Sales That Go Bump In The Night – Sunday is Halloween and that means next week the “sell in May and go away” cycle is replaced by its bullish opposite.
Traders, however, will also note that it marks the beginning of a new tax sale fiscal year for mutual funds. Traditionally, trading profits taken by mutual funds before Halloween result in a taxable event for the fund holder in the same year. Profits taken after Halloween are not taxed until the following year.
So, are mutual funds sitting on a batch of profit-taking sales starting next week? There may be more to think about than elections and QE2.
Speculating On Terror – In the days after the 9/11 attacks, there was much speculation around the U.S. as to whether there would be another “event”. What shape would it take? When might it occur? One of the consequences was the “Halloween note” rumor.
A story swept the nation that a young lady had been dating a young man from Saudi Arabia. On the afternoon of 9/11, she reportedly returned to their apartment to find the young man, and his belongings gone. The only thing she found was a note.
Supposedly, the note expressed his love, said he could not explain what was going on and said they might not meet again. But, because he loved her, he begged that she not go out in public on Halloween. The story of the note went viral and swept the nation via email.
At the time, we pointed out the long history of such stories in fearful societies. By signaling out a specific date – Halloween – it removed the “randomness” of the potential threat. If you believed the story, you would be safe until Halloween. And, if you stayed home, you’d be safe – even then.
According to the buzz we’re hearing, a new speculation on terror may be evolving. We suspect that the seed may come from warnings from the authorities that a future attack might be “Mumbai style”. That reintroduces a sense of randomness. You’re not safe by staying out of airports or tall buildings. You’re not sure what will be safe.
Apparently, folks are trying to address the Mumbai style randomness by finding an anchor or a signal. The speculation has seized on the botched car bombing in Times Square. It has been merged into a new theory that car bombings or car fires will be used a diversion. They can attract large crowds – fire, police, press and the curious. The large crowds would be vulnerable targets.
A second version suggests the car bombs are to divert authorities and leave other targets vulnerable. They even have a Halloween aspect – but Halloween is too near. So, since the first was on 9/11 – how about 11/9. And you thought you had to go to school to study creative writing. Happy Halloween!
Cocktail Napkin Charting – As noted above, the napkins were spot on again yesterday as the 1188/1191 resistance band for the S&P was a virtual brick wall for the opening rally.
The recent narrow closing range on the indices and some minor internal divergences suggest a significant breakout move is at hand. As usual, the direction is not totally clear. Traders assume the move may wait for next week’s key event.
For today, napkins see resistance at 1188/1191 followed by 1197/1200 and then 1207/1210. Support remains at 1170/1173 with fallbacks at 1162/1165 and the critical 1156/1159.
And the usual history lesson
EDITOR’S NOTE - SINCE THE MEDIA IS AWASH WITH ANNIVERSARY OF “THE ’29 CRASH” SPECIALS, WE’LL SKIP THE TOPIC
On this day (+2) in (approx.) 823 B.C., the most inventive, charming and clever people ever to grace God's green earth came up with yet another ingenious idea. They were, of course, the Irish (at this time A/K/A the Celts). Being bright they did not labor upon the obvious. So they let somebody else invent fire, the wheel, iron, astronomy, writing, calendars, etc. These they figured they could copy - - and boy did they. These clever folks, well, they tended to save their strength for what was really important.
By this stratagem, just a 1000 years earlier, while pagan types were grappling with such mediocrity as pyramids, irrigation and geometry, the Celts had learned to distill grain. This miracle medicinal cure (which would maintain mankind for over 3000 years) they called Usquebah. The amazed and very indebted rest of the world mis-translated the name as "whiskey".
So for a millennia these wise and whiskey-witty folk enjoyed good health and good fellowship. Then as this particular day approached (circa 823 B.C.), possible gender conflict arose. The women began expecting the men to hang out close to the cave as the evening came earlier each fall. If civilization were to progress this would never do!
So the Celtic elders came up with the second great invention. They called it "Samhain" or end of summer. They explained to the women that as the season changed, ghosts, goblins and evil spirits came forth to threaten all humans. In order to protect the women and children, the men folk selflessly would have to put on old clothes, take some jugs of the magic Usquebah (possible snake bite you know) and go into the hills and light fires.
For nearly 1000 years the tradition held. Then came the good St. Patrick who was wise enough to keep the Usquebah but drove out the snakes.
Conveniently, his Christian teaching did say that November 1st was the Feast of All Saints. So it only seemed logical that if the saints were coming out, the devils would have one last fling. So, snakes or no, we needed old clothes, bonfires and booze on the eve of "All Hallows" or Hallow's Evening or Halloween.
To celebrate stop by "The Bog on the Moor" and fortify yourself against snakebite, but stop when ye begin to see the little people. For to go beyond will surround you with all kinds of devilment like - banshees and ghoulies and even mothers-in-law.
The markets vacillated between trying to trick and trying to treat all day Thursday. If indecisiveness were an Olympic sport, traders would have nailed the gold yesterday.
h/t London Dude Trader