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Art Cashin: "Sitting On The Edge"

Tyler Durden's picture




 

Forget any overly complex and meandering explanation you have heard about today's market action. The real reason for the bounce is simple: oversold market coupled with yet another short squeeze (NYSE Group biweekly short interest data showing shorts spiking in the first two weeks of November due out today). Art Cashin explains.

Sitting On The Edge - We have been saying for weeks that we, along with Secretary Geithner, are concerned that European leaders have no mechanism in place to handle any sudden acceleration of the crisis. Basically, there is no financial fire department and no sign of one being hired.

 

Moody’s and others are indicating that time is running out and it may be a matter of days. ICAP, the currency trading facilitator, said it is testing its systems for a return to the drachma or even the Deutsche mark. Italian PM Monti admitted that the breakup of the Eurozone has been broached at meetings with top leaders.

 

This morning European stocks and U.S. futures are spiking sharply. The pundits are trying to pin the spike on everything from Black Friday sales to an IMF bailout of Italy. We think the spike is the reaction of a very oversold market to the resurfacing of the Sarkozy based rumor of a treaty deal for fiscal linkage. But, even if it’s true, can it be implemented quickly enough for a situation thought to be days away from crisis or climax?

 

The IMF bailout, already denied, was always unlikely since the U.S. is a key player in the IMF. Using U.S. funds for a European crisis is unthinkable in the current political environment. As to Black Friday, look what was said about last year’s Black Friday last November. Also, how could it help Europe so much?

 

Lastly, European bond markets are more placid and skeptical than their equity cousins. That supports the oversold causation thesis.

 

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Mon, 11/28/2011 - 09:59 | 1920608 The Axe
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all true...

Mon, 11/28/2011 - 10:04 | 1920631 Carlyle Groupie
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Art got pinched in this short squeeze.

Mon, 11/28/2011 - 10:10 | 1920649 CPL
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Greg, either stay Robotrader or don't.  Hard keeping track of the bullshit you fling around here with all the sock puppet accounts you have on here.

Mon, 11/28/2011 - 10:29 | 1920667 hedgeless_horseman
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We...along with Secretary Geithner, are concerned that European leaders have no mechanism in place to handle any sudden acceleration of the crisis. Basically, there is no financial fire department and no sign of one being hired.

Art and everyone else pimpin' Eurobonds.  Just a matter of time, now.

Mon, 11/28/2011 - 10:36 | 1920747 High Plains Drifter
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pimpin ain't easy....

 

http://www.telegraph.co.uk/finance/financialcrisis/8919470/IMF-drawing-up-500bn-package-to-save-Italy-Spain-and-the-euro.html

 

imf readies financial relief columns to go into italy and spain to help out with opm (other people's money) created out of thin air with interest rates attached and lent by you know who (for the good of tha world doncha know)   

why is it when i read things like this i get this itchy feeling in my shorts............

 

when are we going to stop this insanity?  when?

Mon, 11/28/2011 - 10:46 | 1920755 hedgeless_horseman
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Flippin' Eurobonds back to the ECB on a guaranteed bid, a la QE, would be easy, profitable, and bullish for stocks (in nominal terms).  Although my crystal ball is only a novelty item, I can still easily forsee this coming.

It's just not fair that the ECB can't monetize like the US, UK, and Japan.  How are we supposed to have synchronized diving when one of the central banks is wearing a life preserver?  Get that thing off of Europe!

Mon, 11/28/2011 - 11:02 | 1920838 High Plains Drifter
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when you look at the top ten members of the imf , what i see, (silly me) is that most of them are also broke themselves......how in the hell are any of these members going to kick up their required monetary quotas on these bailouts when they are broke themselves...?   what am i missing here?

http://en.wikipedia.org/wiki/International_Monetary_Fund

http://www.imf.org/external/np/exr/facts/finfac.htm

 

when the tarp came up, the american people by a ratio of 90 percent were dead set against it and emailed , faxed , wrote letters and flooded the washington area phone banks with calls telling their congress persons not to do this, yet they do it anyway. the system is broken and cannot be fixed.  the people can no longer petition their elected officials for redress of grievances because they are not listening to us anymore. so ..who is in control of them and why?

 

 

Mon, 11/28/2011 - 11:08 | 1920853 hedgeless_horseman
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how in the hell are any of these members going to kick up their required monetary quotas on these bailouts when they are broke themselves...?

Ctrl-P.  It is what they have always done.

Mon, 11/28/2011 - 11:26 | 1920911 Seer
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Note sure that they can be sure that printing can heal pitchfork wounds...

Mon, 11/28/2011 - 10:40 | 1920759 Carlyle Groupie
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Lots of bullish news. Looking good for the PM-equity crowd. Get levered on the paper physical delivery is taking too damn long!

Mon, 11/28/2011 - 10:29 | 1920725 Carlyle Groupie
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Relax Paul just because I changed my avatar from default to (real) i-diggity does not mean there is some crackpot conspiracy going on behind the scenes. Chill.

Mon, 11/28/2011 - 10:09 | 1920645 CPL
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Funny thing about sitting on the edge of a wall.

 

You're screwed if you fall backwards or forwards.  All the kings horses and all the kings men could not put something something something....

Mon, 11/28/2011 - 10:18 | 1920670 PD Quig
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Hey. I can't make it out: does your Che avatar have his finger up his nose?

Mon, 11/28/2011 - 10:24 | 1920703 hannah
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che just had his finger up stalins ass...wiff.wiff...wiff

Mon, 11/28/2011 - 10:25 | 1920709 CORNGUY
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LOL......yup, looks like that guy is two nuckles deep.   YUCK

Mon, 11/28/2011 - 10:26 | 1920711 slaughterer
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This rally realy caught technicians off guard as the market was FAR FROM oversold last Friday.

Mon, 11/28/2011 - 10:42 | 1920771 Smiddywesson
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This rally realy caught technicians off guard as the market was FAR FROM oversold last Friday.

No it didn't.  Yes, they called for a crash, but this was a zig-zag extension of a subminuette third leg decline.  So they weren't wrong, just everybody who listened to them lost their money.  It's that simple.

Mon, 11/28/2011 - 12:45 | 1921233 DCFusor
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FWIW, this tech closed all the broad market shorts Fri, but kept the euro short...and a little FAZ, but both are still green - long term (for me) holdings.  My longs are nice, and I'm trimming them today, as I think this IS pure hopium/short squeeze...

But I think there's significant risk that someone (fed) will come in and try to bail the EZ - it won't work, but it'll make things spike if they do it, for a little while.  Then back to reality.  Intenstinal fortitude seems to be the thing you need most these days.

Mon, 11/28/2011 - 13:50 | 1921495 PD Quig
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Actually, TF 667ish was the target extension of wave 3 down from 768.4. Closed my TF short at 670 on Wed. Still long DX though. Looking to re-short at TF 717-719 for the next move down to 640.

Mon, 11/28/2011 - 12:35 | 1921185 ActionFive
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You have to define oversold in terms of not/real markets.

If they let the low go below the last 1100 lows, it would ruin sentiment for Christmas rally into election show.

Plus, there had to be short money to steal..

Mon, 11/28/2011 - 10:32 | 1920737 curbyourrisk
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true or not....

 

American leadership are so steadfast on saving the EURO to kill the  USD they will do anything at this point.  Expect a bailout of ALL OF EURO-LAND!

 

Mon, 11/28/2011 - 11:24 | 1920904 baby_BLYTHE
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Yes, they will inflate or die. Printing money has never worked in the history of the world, but they don't care as they continue to show episode after episode in this 'global kick the can charade'. Since the US happens to be the reserve currency and is tied to global crude outlays, Hyper-Inflation will be the only outcome from any of this. ZIRP till 2013 and beyond guarentees a global currency crisis within the next year or two.

Mon, 11/28/2011 - 11:28 | 1920919 Seer
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Yup, airbag time.  Inflate during impact...

Mon, 11/28/2011 - 09:59 | 1920609 monopoly
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A man of reason and intelligence. Wish him the best, always.

Mon, 11/28/2011 - 10:07 | 1920641 Randall Cabot
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That's why he's usually wrong.

Mon, 11/28/2011 - 10:01 | 1920613 AngryGerman
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"The real reason for the bounce is simple: oversold market coupled with yet another short squeeze [...]".

No sir, the crisis is over!

Mon, 11/28/2011 - 10:06 | 1920636 jcaz
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Sure it is..... Hey, better answer the door-  Merkel has the brownshirts rounding up gold from the people.....

Mon, 11/28/2011 - 10:01 | 1920616 GeneMarchbanks
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Oversold? That's silly.

Mon, 11/28/2011 - 10:12 | 1920657 CPL
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I'll dust off Buy, sell and hold for later.  There is the fourth traders position I've become very fond of.

 

Ignore and don't buy into it.

 

 

Mon, 11/28/2011 - 10:24 | 1920687 Popo
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Exactly.  "Oversold" is most-often a silly trader's word with zero bearing in reality.   The people who believe in "oversold" just because we've had a few down days are the same people who flip a coin 5 times, and get heads -- and then believe that they are more likely to get a tails on the next toss because they're "owed" one.   (I remember seeing a documentary on Vegas gamblers, and the vast majority believed that was actually true.  Which explains a lot about markets).

Oversold, my ass.  We had a very small little downdraft on the news that the European Union is imploding,  its banking system is insolvent and the currency is most likely doomed.   That should be good for a couple points max -- and then it's rally time, right?  </sarc>

This market is deeply, DEEPLY, overvalued.  Equities are in no way pricing in the financial devastation that lays all around us.  (Not 'before' us, but 'around' us.  As the devastation has already occured).

 

Mon, 11/28/2011 - 10:31 | 1920733 Sunset chaser
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Agreed. During this recent leg down, presumably to complete the ominous broadening formation that has been building over the last couple of months, a spike in the VIX has been conspicuously absent, meaning there's still room to the downside.

Mon, 11/28/2011 - 10:53 | 1920816 Smiddywesson
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Exactly.  "Oversold" is most-often a silly trader's word with zero bearing in reality....This market is deeply, DEEPLY, overvalued.  Equities are in no way pricing in the financial devastation that lays all around us.  

I'd take that a step further and say that the markets themselves have no basis in reality other than that which their masters allow to provide an illusion that there is a market to the suckers, er, I mean investors.

Mon, 11/28/2011 - 10:22 | 1920694 LMAO
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Yeah, he almost makes it sound like technicals matter in this broken market. It's just another of many non-explanation-explanations as to why the market moves.

Mon, 11/28/2011 - 10:56 | 1920825 Smiddywesson
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He could counter that technicals matter when TPTB are holding the market in a range, which is reflected in his technicals.  However, I agree with you, this market is fixed and technical and fundamental analysis can lead you right off a cliff under these conditions.

Mon, 11/28/2011 - 10:02 | 1920618 fonzanoon
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QE3! Dammit. Someone send these guys a memo.

Mon, 11/28/2011 - 10:02 | 1920623 Paul Thomason
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If the ECB became a new country then US would have a new country to liberate and new leaders assasinate.  This may be a feasible solution - seems to have worked well elsewhere.

Mon, 11/28/2011 - 10:04 | 1920630 lairdwd
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Art is the man.

Mon, 11/28/2011 - 10:11 | 1920656 lolmao500
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Kyle Bass about Japan and Europe...

http://www.youtube.com/watch?v=-quUyId2WZ0

Mon, 11/28/2011 - 11:44 | 1920983 Seer
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One could get the impression that the US is sitting pretty good in comparison, that is, until you realize that with all these other countries imploding that means there's no one out there (except the Fed*) to by US bonds.

* Buying your own debt is like the snake eating its own tail.

I like his noting of the xenophobia in Japan.  Trav should take note of this.  That said, xenophobia or no it still won't overcome the driving issue of there not being enough resources to sustain growth.

Mon, 11/28/2011 - 10:12 | 1920659 midgetrannyporn
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This market is not even close to being oversold...

 

http://www.zerohedge.com/news/guest-post-glimpse-future-stock-market-and...

Mon, 11/28/2011 - 10:41 | 1920765 No Mas
No Mas's picture

Hey good lookin', markets have just started going up my man.  You can put away the pepper spray and make money the old fashioned way - GO WITH THE FED!!

This was you up in Chi-Town wasn't it?

http://www.chicagotribune.com/news/local/breaking/chi-transvestite-muggers-target-lincoln-park-pedestrians-20111126,0,1130381.story

Mon, 11/28/2011 - 10:14 | 1920662 Everybodys All ...
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Who in thei right mind is buying into todays pre-market move? It makes no sense to take that kind of risk.

Mon, 11/28/2011 - 11:01 | 1920835 Smiddywesson
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It makes less sense to sell, because once the shorts begin covering they begin to create a cascade through multiple resistence levels, and it matters not that the original reasons were baloney, it becomes self fulfilling.

Mon, 11/28/2011 - 10:14 | 1920663 The Ram
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While QE3 looks probable, it already being administered in various forms.  Look for money going 'missing' for one.  Sound familiar? Also, things are various tenuous as many Asian economies just do not want  additional massively devalued currency buying up their assets. 

 I am not an insider, but I believe that shit is happening behind the scenes that can rapidly bring things to a stand still.  The key players here are the productive economies of Asia.  How they way-in on additional leverage and devaluation of the Western currencies (Dollar and Euro) is key.  The question they must now ask: do they exchange additional hard goods and natural resources for Western digital toilet paper?

We are definitely in the Red zone.   

Mon, 11/28/2011 - 10:14 | 1920664 slaughterer
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Watch Art's shorts burn as much as his nose after marinading his ice cubes.  

Mon, 11/28/2011 - 10:15 | 1920668 Quinvarius
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It does have that bear market rally feel to it.

Mon, 11/28/2011 - 10:16 | 1920671 EL INDIO
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This looks like when the euro surged for 1 day to burn the weak shorts than resumed its downward trajectory.

Give this shit 2/3 days to be reversed.

Mon, 11/28/2011 - 10:18 | 1920674 rambler6421
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Short squeeze bitchez!

 

libertarian86.blogspot.com

Mon, 11/28/2011 - 10:19 | 1920676 Nemo01
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Assuming this market is oversold, how much upside is there left (next resistance level)? Any chartists out there?

Mon, 11/28/2011 - 10:28 | 1920721 slaughterer
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Bear chartists will be capitulating if 1280 breaks.  We are stll a long way away from that.  

Mon, 11/28/2011 - 10:19 | 1920677 spanish inquisition
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If you take the market is corrupt top to bottom approach, then this is a great rally for insiders to unload their remaining stocks to the FED.

Mon, 11/28/2011 - 10:19 | 1920679 Cdad
Cdad's picture

Forget any overly complex and meandering explanation you have heard about today's market action.

You mean turn off the BlowHorn [CNBC]?  Good grief, these guys are a joke.  250 DOW futures up...on a disproved rumor...and they want to segway into Black Friday shopping success stories and 10 times earnings being "cheap."

Look..."oversold" and "cheap" are different things...which is why the BlowHorn is trying to confuse you.  If you look forward, as equities are supposed to do, stocks are priced for stupid.  As for being "oversold"...ummm...well, that was taken care of by futures, and that is probably already over and stocks are overbought.


Mon, 11/28/2011 - 10:25 | 1920706 The Fonz
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Even if I wanted to put a little money into this short squeeze, I couldn't, it has already moved 3%.  There is overhead resistance coming right up with the 50 DMA, and a fairly strong resistance point all in one place. Also if I wanted to go long I'd have to consider that these moves are happening out of my reach at night. I don't think it can go too far. 

Mon, 11/28/2011 - 10:26 | 1920713 hannah
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"The IMF bailout, already denied, was always unlikely since the U.S. is a key player in the IMF. Using U.S. funds for a European crisis is unthinkable in the current political environment. "

 

...so we find out the fed pumped trillions to the banks in 2008.....why would the fed NOT BAIL OUT THE IMF...?

Mon, 11/28/2011 - 11:54 | 1921031 Seer
Seer's picture

The US Congress would have to authorize this action, as it's not allowed in the powers currently afforded the Fed (not its charter).

Not saying that it won't happen, just that that's why it hasn't already happened.  I'm thinking that the Congress won't be able to politically justify such action, especially given their clear acknowledgement of the US's financial position.

Mon, 11/28/2011 - 10:27 | 1920716 Randall Cabot
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The recent October short squeeze lasted three weeks and 200 S&P points!!!

Mon, 11/28/2011 - 10:29 | 1920722 g speed
g speed's picture

Bonds not "rolled over" principal going to equities?  

Mon, 11/28/2011 - 10:37 | 1920752 PulauHantu29
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Germany's Pickle:

This weekend we explained the real reason Germany isn't so hot on the ECB bailing out the rest of Europe: It's done a fantastic job of keeping labor costs contained, with very little wage growth over the past decade.

Workers haven't seen any wage inflation, but in exchange they have an unemployment rate that's the envy of the developed world.

As such, any inflation cuts directly into their wages.

In the latest economic outlook for the OECD, there's this chart, which shows the unit labor cost situation for Germany and the rest of the Eurozone.

As you can see, everyone else in Europe but Germany has seen a big spike in unit labor costs over the last decade.

Of course, if Italy, Portugal, Greece, et. al. are to regain competitiveness, these wages have to come down, which is something that will be difficult to do in the Euro, since the natural way to accomplish this is via currency devaluation. There's your pickle.

Read more: http://www.businessinsider.com/core-unit-labor-costs-in-germany-2011-11#ixzz1f0jNOM55 I still bet oil will rise to $250 since "austreirty" is a no-go in the EU esp ith over 300,000 MENA refugees flooding into the Eruozone.
Mon, 11/28/2011 - 10:52 | 1920794 sasebo
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Who's buying all this stupid shit? And where are they getting their computer money from? The fed?

Mon, 11/28/2011 - 10:58 | 1920828 Scalaris
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I don't understand why everyone is behaving differently than they did during the previous paper-induced rumours out of Europe. Also the rumour was denied, yet in the past 12 hours Bloomberg has been attributing today's surge in "rapid efforts to limit contagion by policymakers" along with "phenomenal economic boost from black friday sales". 

I know that they are determined to achieve a semblance of last year's party-rally, to make their dismal YTD earnings look less abysmal, but this is becoming comedic.

I mean "La Stampa" spewed something and that's it? Is there nobody that investigates this kind of rumours and their correlations with any major trades, or are we pretending that nobody's making billions every time a zero credibility rumour shoves itself into the public domain?

And shouldn't the "technical" oversold state of the market be supported by the necessary fundamentals? And if so why do they keep asking technicians, about things that are entirely affected by politicians and their decisions?

Mon, 11/28/2011 - 11:01 | 1920834 common_sense
common_sense's picture

Financial system is autofeeding itself...until it exploses but this is like modern economy works in occidental countries. And being assumed by the rest of the world as the good way. "Money culture", the last big stupidity of humans in this century. But the end of this stupidity will come early.

Mon, 11/28/2011 - 11:05 | 1920849 orca
orca's picture

Call me stupid, but I just don't buy this "short squeeze" crap anymore. On the contrary, everybody's long, this is just another worldwide futdriven liquidity idiocy, in order to get the sentiment moving. apart from that, there are good reasons to be long in the fiatponzi part of your portfolio, as opposed to bonds or cash.
For real staying power nothing beats the rich man's silver of course.

Mon, 11/28/2011 - 11:19 | 1920892 sheeple2012
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Art is assuming the Bernank gives a shit about US public opinion, appropriate Fed behavior, etc. - bad assumption

Mon, 11/28/2011 - 11:47 | 1921000 Chappy
Chappy's picture

I thought we were at the end of the 300pt rally days.  What was I thinking?  Think this is the start of another epic oct4th style rally?  I got fleeced that time waiting for the market to reverse. What ever happned to elevator down and escalor up, not elevator down and super elevator up.

 

Mon, 11/28/2011 - 11:58 | 1921045 Seer
Seer's picture

"Using U.S. funds for a European crisis is unthinkable in the current political environment."

I know that I stated that I didn't think that the US Congress would authorize the Fed to bail out the IMF, but hasn't the Fed already channeled money directly to EU banks?  If so, what really is the difference (over channeling it through the IMF)?

Mon, 11/28/2011 - 11:58 | 1921047 Precious
Precious's picture

Guess again.  It's much simpler.  Fund managers took Thanksgiving week off.  Now they are back.  What do you expect them to do.  Sit on their hands?  No.  They unloaded positions before vacation.  Now they are picking up new positions.  These are just human beings.  They want vacations too.  You think they care about micromanaging their porfolios?  Bull. Everybody knows individual stock picking is a game for fools.  No.  They just picked up the dartboard again this morning and got back to the business of duping their stinking rich private investors.

Mon, 11/28/2011 - 12:13 | 1921103 dracos_ghost
dracos_ghost's picture

Add end of month window dressing and you have a real momo lemming fest.

Let's not forget that the Socialists (aka Wall Streeters) need Obama in office -- or better yet, Goldman lackies in the WH. A down stock market on his watch is a low probability. 1/03/2011 SPX was ~1260-1270. Let's see where it closes for the year. 401k will be paralyzed in their accounts. Won't want to sell since "the market is coming back" but also will be sitting on a goose egg for Y/O/Y return.

Being a cynic, I have a hunch that the EU already has a packaged deal in place and all this drama is a controlled crisis to push an unwanted agenda on the populace.

These guys are politicians, create and manage a crisis and then ,at the eleventh hour, come up with a solution and come off as relative heroes.

 

 

Mon, 11/28/2011 - 12:13 | 1921100 slewie the pi-rat
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i hope art wasn't in a public toilet making a FED deposit when he wrote this...

Mon, 11/28/2011 - 12:16 | 1921112 YesWeKahn
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Technical wins.

Mon, 11/28/2011 - 12:47 | 1921246 ugmug
ugmug's picture

 

 

Today's market rise is due to fat fingers stampeding to beat everyone else to buy a $2 online waffle iron stock.

Seriously what's the difference between the public’s stampede on Friday and the stock traders stampede just about every other day.

 

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