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Morning Musings From Art Cashin
From UBS Financial Services
Napkins And Expiration Combine To Halt Plunge – Heading into the opening Friday morning, markets and traders were more than a little nervous. Markets in Asia and Europe continued to show meaningful anxiety about what might be evolving in Euroland.
Knowing that the opening would bring on a likely flood of sell orders, we wrote the following in the Napkin section of the pre-opening Comments:
“For today, all eyes will be on S&P 1065 (flash crash lows) and 1055 (February pullback low).”
The opening down-spike shot right through the 1065 flash crash lows. Within ten minutes after the opening bell, the S&P ticked at 1055. They never ticked lower. Holding at 1055 gave the bulls the chance to claim a potential “double bottom”. That allowed stocks to move smartly higher and, by 10:00, the averages had moved back into plus territory.
As I noted on the UBS squawkbox and to a few trading friends that was not the ideal that the bulls had as first priority. That ideal was for the S&P to break support and fall into a quick capitulation selloff. Given the heavily oversold condition, that could allow for a massive reversal rally that might give the bulls days, or even weeks, of security. As usual, the market refused to give the easy ideal.
Here’s what I said to some friends (and on the squawkbox) at the time of the 1055 bounce.
Instead of the desired penetration of the February lows (S&P 1055) and a brief capitulation selloff followed by sudden sharp reversal – they stopped exactly at 1055. That allowed for some small hope of “double bottom” resulting in current, rather anemic rally attempt. What bulls need now is time. The longer they stay above 1055, the more credible the bounce concept becomes.
Hanging onto the “double bottom” possibilities, stocks stayed in plus territory for most of the session.
Then, in mid-afternoon, weekend angst appeared to show up. Shortly after 2:00, bids began to cancel. The averages headed south and soon slipped into mild negative territory. The selling never turned aggressive, however, and the S&P stayed well above 1055, reinforcing the “double bottom” hopes of the bulls.
In the final thirty minutes, the Expiration “market on close” orders leaned to the buy side. That boosted the bulls even further.
Among the post close ice cube marinators, the assessment was that of the Dow’s 125 point advance about 65 or 70 belonged to the “double bottom” with the balance going to the Expiration.
Cocktail Napkin Charting – The napkins had quite a day Friday. Not only did they highlight the 1055 level in the S&P, they suggested resistance at 1088/1092 (rally high was 1090).
As we noted last week, this selloff has swiftly driven several market metrics into a heavily oversold condition. The number of stocks above their 50 day moving averages has absolutely plunged. It now is at an area that often corresponds with a rally beginning. Other very oversold metrics are the ARMs Index and aspects of the McClellan Oscillator.
For today, the napkins suggest support in the S&P around 1068/1072. Of course, in a real selloff, a possible retest of the 1055 “double bottom” could be critical. Resistance looks like 1088/1092 and then 1098/1102.
Consensus – Futures and markets quite nervous as Spain steps in to seize a 146 year-old savings bank. That has stocks sinking along with the Euro. Gold is bouncing off its 200 DMA. Oversold and ripe for a rally but, oh so fragile. Stay very, very nimble.
Trivia Corner
Answer - The three capitals in five letters are: Dover (Del.); Salem (Ore); Boise (Ida.)
Today's Question - I know what I wrote - Bob called up the hardware store for a piece of chain for a fence. When he got it home, he realized the clerk had switched the inches for feet and vice versa. The result was a chain that was only 30% as long as the one he had ordered. How long was the original and how long was the one he got?
AN ENCORE PRESENTATION
On this day in 1929, New York audiences were treated to the movie premiere of "America's First Family of Entertainment." No it was not the Jacksons nor Osmonds nor Barrymores nor Booths. But it was a family that felt it needed talking pictures before it would desert Broadway for Hollywood. And it was a wise decision…..for, though one of them would never speak a word, their talent was terribly verbal.
They were, of course, the Marx Brothers and the movie was "The Coconuts." It had everything including romance - "Your eyes shine as brightly as the pants of my blue serge suit", says Groucho. But, of course, you know that. You probably know everything there is to know about the Marx Brothers.
You know that the oldest was Leonard (Chico) then Julius (Groucho); Milton (Gummo); Arthur (Harpo) and Herbert (Zeppo). And if anybody challenges you, you can invite them to - look it up - in any library or encyclopedia. And 99% of the time you'd be safe. But in case the guy on the next barstool has the real family documents, you should know that some sources say Harpo's original name was "Adolph" not "Arthur". But something apparently happened in the 1930's that led press agents to assume that no matter how strong your genius quotient, if you were a Jewish comedian named Adolph, you might have to cut ticket prices to fill the house.
So, if you send out for lunch today, try the Tootsie Frootsie ice cream (it comes with a breeders guide).
Traders could have used a hundred Breeder's Guides and all the guile of Wolf J. Flywheel last week.
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Gold 200 DMA is 100 bucks lower Art at 1095, the cocktail napkin musta gotten wet....
watchin' JPM lean on gold and silver, a little over 24 hours to go before the options expiration there....high drama....will the peasantry revolt and force JPM to cover their massive shorts? Or will the Comex/CTFC declare a "glitch" in the trading software, close trading, and declare the expiry closing price at the suspension price to keep their patron happy? high drama....
also, the gang is pushing hard to the upside on the futures....but the damn peasants are not arriving to take the hand off......high drama here as well! will the boyz be able to scam the peasants one last time with rally hats? handing off worthless stock they can short with abandon and steal the rest of the peasantry's savings?
stay tuned.....
art has friends on the JPM trading desks, you know, those guys running around looking for the valium this morning, and getting ready to "conference" with the CTFC and the Comex.
captain, the riggin' is a' comin' loose.
The original order was 9'2" and the one received was 2'9".
...if you constrain the 2 numbers in the order to both be nonnegative integers less than 12. Otherwise, anything with the feet:inch ratio of 4.5:1 works.
LOL the village idiot Mark Haynes on CNBC just said, the market has been up 10 out of the last 10 mondays, then he said "We are in danger of breaking that scam" then he caught himself and changed his words midstream to "scains" LOL