Stocks Catch Down To Reality Again - Where Next?

Tyler Durden's picture

Following last night's explanation that the potential for a short-squeeze is significantly reduced, and given the end of the typical month-end shake-out of excess positioning, this morning has seen stocks pull back modestly intraday and catch down to risk assets' view of the world in the short-term. Volume remains light and the question remains - will the European close bring trend reversal, or will Washington open their mouths and change the game again?


The green line represents CONTEXT - a proxy for broad risk-assets -  (red is the S&P 500 futures). Just as we did yesterday afternoon, stocks surged away from 'risk' only to recouple back down to risk's reality...


Chart: Capital Context

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
venturen's picture

Alice, Pow!Zoom! To the moonAlice, to the moon!

buzzsaw99's picture

moon unit alpha and moon unit zappa have converged

poor fella's picture

Richmont Mines laying off 115 people, closing Francoeur, and suspending exploration at Wasamac. Down 25% - might be a knife worth playing catch with. 

buzzsaw99's picture

Don't worry about CEO Paul Carmel, he already got plenty.

Boilermaker's picture

Oh golly... Let me think.,.,

SmoothCoolSmoke's picture

I'm  bear.... but I think it's BTFD for the next two weeks.  Obama has the ability to jawbone the markets higher with FC hope.....  and he will because that keeps Boner under pressure. Obama can live with tax hikes.  Boner can't.

Conman's picture

I'm missing why either party needs to comprimise on anything. elections over for now. They can jsut bitch and bitch until the market tells them they need to do somthing. Right now the market is saying keep on bitching.

buzzsaw99's picture

This is so true. It is the only thing the fed bank or gubbermint care about.

poor fella's picture

I heard they care about the 2 million potential job losses over the cliff.

The invisible line in the sand wasn't the first 15 million or so? Nope, you're right, the market is the only thing they care about......

SheepDog-One's picture

Yea Conman it IS funny to see politicians acting all worried that their phony-baloney jobs are somehow at risk here and saying they need to 'serve their constituents' LOL....they just do what they want and buy an election anyway....why all the hubbubb?

LouisDega's picture

Damn. Thats a tough one. This should be listed under things that make you go Hmmm..

PeteJE's picture

Silver is marking a path in the medium term over 40.  Just building a beautiful cup and handle coming out of a falling wedge = all signs that it is a strong bull for silver.  Nothing can go straight up or down - powerful moves require counter trends or the movement can not happen.  The only move with silver is add or hold.

PeteJE's picture

BTW that blog should stay away from pattern charting - they could not be drawing thing more wrong.

JustObserving's picture

What is the reality that you talk of?  Stocks have been in thier own alternate universe since the Fed started printing.  Bernanke's put is 10 times larger tah Greenspan's.  And should the market correct, the Fed will buy stocks.  

All this talk of the fiscal cliff is just a farce as the numbers they are taliking about are ridiculously low.  Just $100 billion a year in cuts with Bernanke about to print $85 billion from January and printing $40 billion a month now?

US debts and unfunded liabilities rise by $23 billion a day and the politicians cannot agree to a $100 billion in deficit reduction a year?

Wake me up when we get to reality.


venturen's picture

No descension in the ranks! We need full speed ahead printing of dollars!

Samsonov's picture

Agreed.  However, the purpose of stoking fears about a fiscal-cliff calamity is to create a "somebody do something" environment.  That "someone" is the government, and they'll do more of what they always do.

PeteJE's picture

SPY puts are the new money market CD.  Park the savings there bit by bit and wait;  I like 1000s% better that .75% returns.

SheepDog-One's picture

Economy in depression, country broke, bankrupt savings-less 'consumer'....hey I know lets pump STAWKS!

RopeADope's picture

Washington D.C. makes Second Life game designers look like amateurs.

ekm's picture

Anybody who understands how a pyramid scheme works will simply understand that there is no way, absolutely no way that this casino can go down. None, zero probability.


The only option left is: CRATERING.

1000 dow points drop per day, for 5 days in a row.

There is no other way left.

dvsteenk's picture

what is striking is that the ramps start and stop at specific times, like someone pushes a button and the auto-pilot puts a floor under the market, ever at higher levels, and following some mathematical trend that looks completely artificial to everybody except the financial supervisors

then floors drop out when markets close, instantly, until the "thing" takes over control again

I'm trying to model how this thing behaves, but it seems to mutate or have unlimited buying power, there's only one way, up up and up...

reminds me of summer 2009, when the big squeeze started

ekm's picture

It's pyramid scheme. What you are describing is FORCED BUYING. The primary dealers stuffed with stocks nobody wants, have no other choice but to buy buy buy buy until:

- They run out of money

- Market runs out of stocks (this one is happening IMO).


Do not bother. Fear cannot be modelled.

NEOSERF's picture

Too many issues with Greece swinging in the wind, too far apart on cliff, economic numbers declining which will continue EVEN IF the cliff is avoided, winter coming which generally means less consumerism and more energy costs...generally I think the market will send a strong message to Congress starting today.

Bansters-in-my- feces's picture

I see gold and silver got bitch slapped again.

Fuck you bernanke.

bullmkt's picture

wow! what a plunge! Tylers hoping his shorts will survive!

polo007's picture

Since WWII, the Americans, Japanese, British and Europeans have spent way more money than they owned. But that was ok because the money they borrowed wouldn’t have to be repaid until some far away day in the future.

Unfortunately the future has now arrived and today, the next generations of Americans, Japanese, British and Europeans have all plunged into a deathly debt spiral.

Today it is no coincidence that the Americans, Japanese, British and Europeans have all set interest rates as close to 0% as possible.

Also today, it is no coincidence that the Americans, Japanese, British and Europeans are all printing money. And finally, today it is also no coincidence that the Americans, Japanese, British and Europeans ignored Friedrich Hayek and instead followed the economic principles of John Maynard Keynes.

Today the entire global economic and financial system is rooted in unwavering support for John Maynard Keynes and his beliefs in deficit spending and debt-fueled growth.

polo007's picture

So, who's right? Does the insolvency of European governments cause deflation, which sends the dollar soaring and gold plunging? Or does the insolvency of the U.S. government cause a collapse in the dollar and hyperinflation?

Probably both and neither. European governments and international institutions are likely to connive in any way possible to avoid the defaults and the resulting deflation from Europe. The most expedient way is for the European Central Bank to buy the bonds of the heavily indebted economies of Spain and Italy. That would both finance their deficits and lower the value of the euro, which would boost the competitiveness of the peripheral economies of the euro zone.

Does this violate every precept of the founding of the single currency? Of course it does and Germany will object vociferously. But ECB President Mario Draghi has pledged to do whatever it takes to save the euro. Since he made that pledge last July, that in itself has restored confidence. The ECB can only buy bonds only when a government accedes to harsh conditions, which none has had to do. So far, Draghi's mere declaration has lowered the funding costs for Italy and Spain, but actions may eventually needed to back up his words.

Meanwhile, the Fed has effectively inaugurated QE infinity, buying securities until unemployment is brought down to some satisfactory level. So, the U.S. central bank will be churning out greenbacks, which will effectively fund the federal budget deficit. In addition, the Bank of Japan is being urged to engage in quantitative easing until deflation turns into inflation by the leader of the opposition Liberal Democratic Party, which is likely to regain power in elections next month.

Bottom line: every major central bank around the globe is likely to continue printing money to stave off any deflationary undertow induced by the massive debt of their governments. Notwithstanding short-term sell-offs such as Wednesday's $25 drop, central-bank policies should keep interest rates near zero and negative in real terms, which in turn ought to keep gold in its long-term uptrend. As long as authorities try to do whatever it takes to hold the system of fiat currencies and indebted governments from flying apart, paper money will continue to lose value relative to the traditional store of value, gold.

Lewshine's picture

Someone answer me this; The deal everyone is waiting on comes down to a gigantic tax increase, if the Demoncrats have their way - And they usually do because of the media that works on their behalf. A successful deal is good for noone but Govt. It seems to me that the market suffers regardless. If more money is getting sucked out of the economy (consumers/business), causing greater job losses, to make up for higher corporate tax expense for both big and small business - Doesn't that mean less growth and lower profits across the board?? Seems to me that government is the only winner here. Why then is everyone cheerleading and asking for a deal that would make "everyone" a little bit poorer in an economy that is not far to from the abyss to begin with??

What am I missing??



PeteJE's picture

Taxing high income holders does nothing to thwart the economy.  This is money sitting around un-used, hoarded away from the economy.  Taxing (and, yes, redistributing) pulls it back into the economy to function towards spending and growth.

The tax plan from the dems is actually smart.  Lower taxes for the bulk of people and businesses that need any and all breathing room they can get; also, raise taxes on the monies that are being hoarded away to wrest those monies back into the economy.


RopeADope's picture

The problem is the huge amount of money that escaped the country due to trade deficits. Very hard to recover that freely handed out fiat that has nothing to do, especially if there are national security issues with allowing it back into the country to tax. So in the meantime you are carrying a massive debt load on a non-performing asset.