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Stocks See Biggest 2-Day Gain In 5 Weeks On...Denied Rumors?

Tyler Durden's picture





 

Citi was the headline-maker of the day and is now (somehow) up 12.4% from QEtc. AAPL's low average-trade-size but reasonable volume rip (+2.3%) just failed to fill the gap-down from 10/5 but provided just the excuse the market needed to rip on a debate-day. Tech remains the only sector in the red post-QEtc. The last two days we have seen the same pattern play out as in the last few weeks, a plunge-plunge-linear-ramp with the opposite scale on volume during these moves. Today's equity market levitation was predicated on rumors of a pending credit line with Spain - which was denied by everyone involved but by then correlations were high and momentum was in charge. FX markets are highly dispersed with JPY weakness and EUR strength leaving the USD -0.44% on the week. Commodities recovered a little on the day with Oil/Copper +0.25% on the week and gold/silver still lagging. Treasuries bear-steepened with 30Y +8.5bps. VIX dropped marginally to 15.22%. Credit was dead after Europe closed, underperforming equities push.

The plunge-plunge-linear-ramp pattern in S&P futures...

 

AAPL just failed to fill the gap to 10/05...

 

and medium-term (the trendline channels are from the May lows) S&P 500 futures saw a trendline (and DMA) test bounce up to another trendline test today with heavy activity at the highs - up near post-QEtc knee-jerk levels (and above the 1444.5 VWAP post-QEtc.)...

 

and a slightly different look at the support levels...

 

Markets were generally relatively highly correlated - both ETFs and broad risk asset classes...

 

but there has been some dislocations intraday between Oil (plunge and recover) yesterday, Gold (plunge and slowly recover today), Treasuries (outperform and then catch down to stocks today), while the USD has been the anchor all along...

 

Are we seeing yet another junk rally as winners become losers and losers outperform... post QEtc. performance for the major financials...

 

and Tech remains the only losing sector post QEtc. with Healthcare leading the way still...

 

Charts: Bloomberg and Capital Context

 

Bonus Chart:Inversion of the 10Y-30Y Inflation Breakeven term structure (lower pane - implying a front-loading of reflationary concern relative to long-term - or over-exuberance at reflation) has occurred at 2 previous important times... will third time be lucky?

 

Bonus Bonus Chart: IBM down over 3% after-hours to one-month lows - which is equivalent to a 50pt smack on the Dow...


 


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Tue, 10/16/2012 - 16:30 | Link to Comment slaughterer
slaughterer's picture

 "another junk rally as winners become losers and losers outperform"--when this happens, I give the market a week at most before it plunges.  

Tue, 10/16/2012 - 16:46 | Link to Comment redpill
redpill's picture

Come on guys, use your creativity a little bit more.  Tomorrow the denials will be denied ("I never denied that!") and then all will be well in the world for some more stock ramping until denial denials are denied, and then rinse and repeat.

Oh, and Buffalo buffalo Buffalo buffalo buffalo buffalo Buffalo buffalo.

Tue, 10/16/2012 - 16:51 | Link to Comment Kitler
Kitler's picture

I see the ECG fingerprints of the evil genius Dr. Bernankenstein all over this one...

http://www.google.ca/imgres?q=bernanke+sons+of+frankenstein&num=10&um=1&...

Tue, 10/16/2012 - 17:09 | Link to Comment FL_Conservative
FL_Conservative's picture

Quit harshing my greenbar-rally mellow, man!

Tue, 10/16/2012 - 16:32 | Link to Comment gjp
gjp's picture

ZH called the (short-term?) bottom with the post about AAPL going through 100-day yesterday.  Best not to crow, that's for the bulls (or the birds?)

Anyway another shitshow betafest.  And another assertion of ultimate power from the banksters.

So far the Federal Reserve has not even been mentioned in the first two debates, and the banks barely a mention.  Think they'll bring up the multi-trillion pound elephant in the room tonight?  Don't make your drinking games depend on it, you'll be depressingly sober.

Tue, 10/16/2012 - 16:34 | Link to Comment Dr. Engali
Dr. Engali's picture

Tonight's topic for the main event will be about Sponge Bob Square pants.....is he gay or is he not, and if he is should he be allowed to marry Patrick?

Tue, 10/16/2012 - 17:00 | Link to Comment pods
pods's picture

The debate is like two fleas arguing about who will best control the dog they are riding on.

pods

Tue, 10/16/2012 - 17:55 | Link to Comment Beam Me Up Scotty
Beam Me Up Scotty's picture

Pepperoni or sausage?

Tue, 10/16/2012 - 16:32 | Link to Comment Jlmadyson
Jlmadyson's picture

Hey as long as Spain is denying the request for bailout which will eventually happen but matters not, and as long as Greece is still down the toilet, and as long as Merkel does not any shared part of debt....

Soros's horror story will continue and traders will drink their kool aid.

Tue, 10/16/2012 - 16:32 | Link to Comment Pancho Villa
Pancho Villa's picture

When politicians deny rumors, it only gives them additional credibility.

Tue, 10/16/2012 - 16:34 | Link to Comment HaroldWang
HaroldWang's picture

IBM just missed on earnings and guided a bit lower. INTC misses on margins, etc. And..../ES just turned green. Never sure how that happens.

Tue, 10/16/2012 - 17:12 | Link to Comment spastic_colon
spastic_colon's picture

IBM has been ramped well ahead of earnings so it is stil well above fair value even after earnings.  The 50 DOW points will be made up for in many other names, notice how CNBS quickly buries IBM and INTC earnings but crows wildly about C

Tue, 10/16/2012 - 17:32 | Link to Comment Squid Vicious
Squid Vicious's picture

According to IBD headline, the rally today was fueled by First Solar, Fossil, and Murphy Oil...

 

IBM and INTC are like, so last decade... maybe tomorrow TZOO, LULU and SPLUNK will lead us to test the year highs...?

Tue, 10/16/2012 - 17:55 | Link to Comment LongSoupLine
LongSoupLine's picture

Easy...the Fed.

Tue, 10/16/2012 - 16:38 | Link to Comment WhiteNight123129
WhiteNight123129's picture

Off topic, have you guys seen this news of yet again imprisonment of a guy for just making vague threats against the US gov?

http://www.dailytech.com/Man+Faces+up+to+15+Years+in+Prison+for+Facebook...

 

Tue, 10/16/2012 - 16:50 | Link to Comment Skateboarder
Skateboarder's picture

Watch as these things increase in frequency until... yep, you guessed it... people become apathetic to it. Apathy is the new sympathy, y'all. Get widda times.

Tue, 10/16/2012 - 17:11 | Link to Comment walküre
walküre's picture

Social media is the ultimate government spyware.

That is what FB and other social media sites are all about.

With the creation of DHS came "social media" sites where Big Brother is having a field day.

Who initially funded FB, LNKD and related spy sites?

 

Tue, 10/16/2012 - 17:22 | Link to Comment Binko
Binko's picture

My favorite part is where the "judge" declared that certain speech has "no social value" and is not protected. 

The First Amendment is all about preventing people in power, like Judge Asshat, from deciding what speech has social value and what speech deserves jail time. I'm sure George III considered all anti-monarchist speech to be totally lacking in "social value".

Most Judges are just a particularly toxic blend of lawyer and politician. 

Tue, 10/16/2012 - 17:43 | Link to Comment Savyindallas
Savyindallas's picture

I suppose he should have said he will take his big hot throbbing Johnson and ram it up the poopshoot of the offending government agent until he is breathless  - now that would be considered protected speech with redeeming social value-at least it would be if the cop is white  -hate speech otherwise, no doubt. It's all a matter of semantics.

Thomas Jefferson wrote: “Occasionally the tree of Liberty must be watered with the blood of Patriots and Tyrants."

Now that is one sick dude. Can we dig up his bones and hang him posthumously? It's sickos like this that are inspiring the new generation of psychos who are daring to handicap the government from protecting us from Muslim terrorists. TSA agents probing the anal cavities of suspected terrorists is a small price to pay for our security.

 

Tue, 10/16/2012 - 16:40 | Link to Comment VonManstein
VonManstein's picture

USDNOK has given a clear picture throughout this USD bear flag. Some traders (whom are very good) are long USDNOK? Err WHY? Its horrible to watch but bellow is the precipice. Its very concerning.

 

I think thats it folks.

Feelings on gold? 1800 by next week?

Tue, 10/16/2012 - 16:46 | Link to Comment graneros
graneros's picture

We ain't seen nothing yet. Don't be surprised if the DOW is 15 or 16K by Nov 6.  Everyone wonders where the rest of the stimulus money is, well it's about to appear on Wall Street. The headlines just before the election will be screaming about the meteoric rise in the stock market and how well the economy is doing. We'll hear all about the "improving" unemployment numbers and just how much better things will be when Obama wins in November.

Tue, 10/16/2012 - 16:56 | Link to Comment walküre
walküre's picture

GS overall posting tremendous results in an economy that is treading water at best and going over the cliff at worst.

Just ask your leadership. How can this be? How can it be that the country is broke, that we're heading for a fiscal cliff and the banks are fat and happy? Surely, your leadership will have an explanation to your satisfaction.

There's no reasonable explanation and unfortunately there is no leadership.

If banks aren't torched by next year, I don't know what has to happen before they do.

Tue, 10/16/2012 - 17:03 | Link to Comment pods
pods's picture

In order for the banks to be torched a HUGE insurance policy against arson will have to be taken out, of course through AIG.

pods

Tue, 10/16/2012 - 17:11 | Link to Comment Kitler
Kitler's picture

Romney/Ryan has to happen... the rest will look after itself.

Tue, 10/16/2012 - 17:13 | Link to Comment walküre
walküre's picture

It has to get worstest before it gets any better. GOTCHA.

Tue, 10/16/2012 - 17:27 | Link to Comment Binko
Binko's picture

Wall Street's wetdream is when every decent middle class job with basic benefits is deconstructed into three part-time minimum wage jobs with zero benefits. 

The really funny thing about the new breed of minimum wage jobs is that they typically only give the worker 24 or 30 hrs a week or less but they expect him or her to be on call and show up for whatever flexible hours best suit master. We are seeing the growth of post-industrial serfdom. 

Tue, 10/16/2012 - 16:49 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Guys, stop.

Just stop.

There is no market.  You know perfectly well there is no market.

The rumors are carefully worded for the algos.  The denials are not.  There are no humans reading those headlines.  The computers do, and the computer owners are TELLING the media what phrasing to use.

Sell it all and look at farmland.

Tue, 10/16/2012 - 16:54 | Link to Comment Kitler
Kitler's picture

Better idea...

Buy farmland. Dirt poor never felt sooo good!

Tue, 10/16/2012 - 17:02 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

A farmer can measure returns in bushels or calories.  

Tue, 10/16/2012 - 16:54 | Link to Comment Skateboarder
Skateboarder's picture

Everyone is sinking in debt everywhere, people don't have jobs, middle-class people are becoming impoverished and in some parts of the world dumpster diving for food... and DJIA is merrily coasting along to break its all time pre-recession 2007 high.

High fives all around for solid economics!

Tue, 10/16/2012 - 17:35 | Link to Comment dvsteenk
dvsteenk's picture

still find that hard to believe, algos reading text and converting that into sensible trading strategies... hmm

i rather think that insiders use the headlines as "explanations" for their well-prepared ramping operations, sometimes well in advance of the headlines or rumours appearing, they get a glimpse at what is going to be released or rumoured - well in advance they take positions in derivatives and then trade these into the money, seems to work every time

Tue, 10/16/2012 - 17:01 | Link to Comment Yen Cross
Yen Cross's picture

If "Felix Baumgartners", ballon had as much helium in it as these B/S markets do, he could have jumped back to Earth from the dark side of the moon!

Tue, 10/16/2012 - 17:09 | Link to Comment Peter Pan
Peter Pan's picture

All this debt is unfunded as it can only be met from future proceeds. There is nothing else backing this debt and even the mighty US dollar is backed by the Saudis who still acccept US dollars for oil. The USA it is sad to say has become a non-entity whose pwer rests in the destructive power of  its military and its derivatives.

Tue, 10/16/2012 - 17:43 | Link to Comment Essential Intel...
Essential Intelligence's picture

Our latest article projects a scenario in which HFT shall destroy the branch of Short-Term Financial trading thus dissolve the $1.5 Quadrillion (=1500 Trillion) mountain of derivatives which entangles the world financials in a fashion which initially seems unresolvable bound to explode itself while taking with it the global socio-economy, especially given it owns the 'Governments' & 'Legislators' i.e. the taxation and interest-bearing corporations.http://essential-intelligence-network.blogspot.com/2012/10/high-frequency-trading-and-information.html

Tue, 10/16/2012 - 18:11 | Link to Comment tawse57
tawse57's picture

This market will not die.

I think we need to resort to trying either sea water or the cold virus. It will not die and I am beginning to fear that any amount of talking on ZH will make it die.

Maybe we need to talk LOUDER!?

Tue, 10/16/2012 - 19:48 | Link to Comment Wakanda
Wakanda's picture

must. keep. sheeple. focused.

Tue, 10/16/2012 - 19:49 | Link to Comment DowTheorist
DowTheorist's picture

The stock market is a difficult place to make money now. This is not the happy nineties or even 2005 or 2006.

To survive in this environment of "junk rallies," as the article says, it is necessary to know how to time the market. Buy and hold will work for a while and monster-size draw-downs will eventually kill you.

However, in too short time-frames "timing," the market is a losing proposal for the average investor. Thus, the only alternative left is to time the market in a time frame that allows for:

a) Not being killed by a monster bear market when it occurs.

b) not being pilfered by HFT.

The optimal balance between overstaying and overtrading, is found in the 1 maximum 2 years time frame.

This is accomplished by following the Dow Theory.

Since the Dow Theory tends to be more responsive than moving averages, sell signals are flashed at ca. 10% from the top. Not so bad and in the meantime it allows the investor to participate in the trend until exhausted.

Thus, the Dow Theory complies with the basic rule of investment: “Cut your losses short, let your profits run”. This is accomplished thanks to the Dow Theory trailing stops. More on them here:

http://bit.ly/OAhUXt

Under Dow Theory, we always know how much we stand to lose whereas the profits are open ended.

It allows us to be long term enough not to be eaten up by HFT and other short-term costs; but it is responsive enough to get us out of the market when real troubles brews.

 


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