Market Commentary: What An Ugly, Ugly Day

Tyler Durden's picture

From Peter Tchir Of TF Market Advisors

Market Commentary: What An Ugly, Ugly Day

We are finishing at the lows or within spitting distance of the lows across the board, except for Gold, which traded like gold, all day long.  Nothing really did anything to slow the increase in the price of gold.  Overnight stock trading was less painful than many people expected (and more than some), but basically S&P futures traded in a range from down 35 to down 15.  Bad, but not extreme.  We even had a few rallies as the ECB seemed to buy a lot of bonds.  The only true bright spot in the day (other than gold), was totally ignored for now. That other bright spot was that Spanish and Italian 10 year yields managed to get to around 5.25% and stay there.  That actually seems like a big accomplishment.  An even bigger accomplishment was how few European politicians spoke today.  Those that did speak had recognizable names.  They seemed to manage to muzzle the deputy ministers etc, who often like to get their names in the paper.  Trichet did seem to be unsupportive.  Yapping about not turning the ECB into a bad bank.  Feels like he is trying to pin as many of his mistakes as possible on his successor, but honestly, Europe seemed as co-ordinate as they have been and seemed to focus more on a direct approach of putting capital to work than on coming up with elaborate plans, with lots of initials that never get implemented.  Hmmm, maybe that is a sign that the Germans have taken charge from the French since it is all their money, and if anyone loves a complex solution where a simple one would be better, its the French. 

Ultimately, it was the U.S. that disappointed the market.  There was a slew of downgrades announced by S&P.  Most were pretty well expected as they were a direct result of the U.S. government downgrade. The insurance industry came under pressure, that was a bit more of a surprise, and a definite negative.  Ultimately, BAC became the story of the day.  It was down 20% or so, and its CDS was out 90 bps, to 300.  Scary numbers without a doubt.  

In spite of that, the market held off on full capitulation waiting for Obama.  And then waiting for Obama.  Then waiting some more.  By the time he finally addressed the nation stocks had already slipped to new lows.  His completely uninspiring speech just accelerated the sell-off.  He did nothing at all to give any comfort to the market.  I thought it was one of his worse performances ever.  Stocks proceeded to new lows.  Somehow they managed to bounce back after 3pm for some magical reason.  Maybe the PPT.  After anyone who had held longs into the president's speech sold into this rally we faded into the end of the day.

There is no point talking about being oversold because clearly every indicator showed oversold coming into today, and left anyone betting on them, nothing but 1 day older and deeper in debt.  The Fed was very quiet today.  Yes I know they have a meeting tomorrow, and are in a "quiet" period, but maybe today was a good day to break it.  Maybe they aren't planning on doing anything.  Maybe they want the market to feel pain.  I assume there are a lot of phone calls coming from Europe trying to figure out if their translation of "co-ordinated" was wrong?  Had the Fed done something today on the back of Europe, I think we would have bounced.  They didn't do anything, so there was no bounce.  If the plan is to do something tomorrow, I think they made a poor decision.  The ECB may not be able to keeps Italian and Spanish bonds bid for another day.  If those bonds start trading back hard, it will be difficult for the Fed to stop the bleeding, certainly much harder than it was today.

The only remaining positives in the market, and they are small positives, is that many who saw only positives 2 weeks ago, only see negatives now.  Perception has shifted a lot.  Two weeks ago, if you said HYG could go to 85, people looked at you like you were from another planet.  I get that look a lot, so I'm pretty good at recognizing it.  HYG at the time was at 91.5.  Today, if you tell people you think HYG can go to 85, they once again look at you like you are from another planet, but now it is at 83, having hit a low 82.33   That is about 12% in 2 weeks.  Remember that case study I wrote about bond markets grinding higher and getting clubbed like a baby seal?  Well the seal just got clubbed.  Not a pretty sight.  But the bearishness does get extreme.  The only time I heard about earnings, it was in relation to how bad they could be in a double dip.  No more talk about how they supported 1,450 valuations on SPX.  VIX also got very high. It has been higher, but this is near the top of a pretty long term range.  I don't think VIX is a leading indicator anymore.  It is part of the risk on/risk off crowd, but just like when the CDS indices start trading too cheap to fair value, when VIX gets this high, it is a decent sign a lot of hedges are in place.  Maybe too many. 

I have no idea on the next move.  Headlines will continue to dominate.  If the ECB can't or won't keep Spanish and Italian rates down tomorrow, and the Fed doesn't initiate QE3, it could get really ugly.  Seems weird saying that it could get really ugly after a down 6.66% day in SPX, but it could.  BAC is another wild card.  With market volatility so high, and liquidity minimal, the one thing that makes the most sense is to stay small and nimble.

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No One's picture

good news folks.. the senate will be investiagting the S&P downgrade.. All is good.


"FLASH: Senate Banking committee probing S&P downgrade of U.S. credit rating -aide"



Long-John-Silver's picture

I hope they use a prophylactic while their probing. They have spread too much to too many already.

max2205's picture

Somebody needs to probe congress for 4 - 20 years of financial mismanagement

cocoablini's picture

The Senate? They are going to threaten the SP for telling the truth...for a change??? CANNOT tell the truth-just like them

oogs66's picture

congress should be investigated

Long-John-Silver's picture

Silver will follow Gold soon. You can't have one without the other.

Spitzer's picture

Im all in support of the silver bugs but if you don't own any gold then you are asking for a kick in the nuts.

Long-John-Silver's picture

I am diversified, I own both.

Sudden Debt's picture

9 to 1 silver vs. gold in value.

So I would like my silver to rally a bit harder. But I've got time on my side :)

People will start to panick. Panick hard. The market isn't going to react like after QE2. And everybody will first try the QE2 bets, fail and run for the hills when they hit rock bottom. And they'll try to recover losses in gold in silver which will be 50% before they'll try it.

And then BOOM!

Funds will need to cover their losses and go for security : Gold/Silver




Re-Discovery's picture

The fight in silver --- industrial vs currency -- is about to be resolved in fovor of currency.  All who missed the Gold move will go looking for something else.

Gold will drag silver higher.

As for volatility, silver behaved very well today after an early day sell-off.  Held its 38.7 support very well.

Jendrzejczyk's picture

After an initial reaction of "WTF, why isn't silver going to the moon", I realized that just holding in place while the financial world crashed around it was proof that silver is a solid store of wealth.

Jendrzejczyk's picture

Let's not forget the heckling that gold and silver are just commodities that will sell off with the stock market just like they did in '08.

Re-Discovery's picture

remember, silver still went up about .6 from friday close.  which equates to a $25 gold move.

one of the few days silver hasnt outperfomed

Fancy Bear's picture

In my car today I heard someone interviewed on NPR who stated that gold is a currency since it isn't consumed like food or oil. The concept is only finally hitting mainstream America. To me, $1750/oz is still a bargain.

zorba THE GREEK's picture

One year ago August, silver was $18 and gold was over $1100.

Big spread. I bought several 100 oz bars because I knew it would catch up.

Re Dis is right, gold will always drag silver higher, just wait for big

spread to maximize profits, especially if you are cashing out gold to buy.

tyler's picture

If you don't own any silver you won't be able to do things one day you only dreamed of.  I swapped my gold for silver a few years ago due to the fact I want to retire and didn't have enough money in gold to do so.  I hope all metals go to the stratoshphere so we can stick it to society.  I don't really mind a kick in the nuts, this is fight club.

Spitzer's picture

Swapping gold for silver sounds like a speculative bet to me. I wish you well, our interests are aligned, we want the easy money, douche bags to get kicked in the nuts.

Thomas's picture

I wanna be an easy money douche bag.

lawrence1's picture

Agree, both. As Sprott said in a recent interview, he believes that the manipulation is directed now toward silver as a means of discouraging gold purchases. Might be a good time to trade some gold for silver as the ratio is now 44-1.  I believe it will resume its downward trend soon. 


Ponzi Unit's picture

bought a little more today.

lawrence1's picture

Agree, both. As Sprott said in a recent interview, he believes that the manipulation is directed now toward silver as a means of discouraging gold purchases. Might be a good time to trade some gold for silver as the ratio is now 44-1.  I believe it will resume its downward trend soon. 


Spitzer's picture

XAU was green all morning, down on the close.

Turd Ferguson's picture


Silver, too.

Chief KnocAHoma's picture

Luv the Turd!

But don't forget land - with water - house - game - in the right area.

I am The Chief

InconvenientCounterParty's picture

platinum is screaming something, but I can't quite make it out.

wombats's picture

Who cares about Platinum.  What about Plutonium at Fukoshima?

trav7777's picture

it's saying the same thing oil is

redpill's picture

I loved the little failed stick save attempt by PPT in late trading that got buried.

LMAO's picture

My sentiments exactly.

That surely was a notable effort on the SPX, a 25 pts. pop after a 75 downmove followed by a 40 pts. smackdown.


Iam_Silverman's picture

"I loved the little failed stick save attempt by PPT"

<sarc> Well, I heard that it was a resurgence by the retail investors once they finally digested the Presidents speech and realized that he was reiterating the need to "tax the rich".  This was their way of showing approval.  </sarc off>

Mr. Poon's picture

"I have no idea on the next move."

Obviously, you don't think like the President, or you would know that what we need next is another inspiring speech.

brew's picture

no idea just like every other "expert" ou there...soft patch?

ElvisDog's picture

The market sold off after Obama's speech, because it made it even more clear that he has no answers. A new deficit reduction plan in a few weeks. Great. Calls for an extension of the withholding decrease. Fabulous. It's Kevin Bacon from "Animal House" telling the crowd "All is well".

andybev01's picture

Speaking of 'a few weeks', are the good men & women still on (their 5-week) 'vacation'?

citta vritti's picture

Let ‘em serve half time (that is, half of the half time they already serve), or restrict the scope of their legislative duties as the Constitution intended. As has been oft and truly said, “No man’s life, liberty or property are safe while the legislature is in session.” Judge Gideon Tucker, Final Accounting in the Estate of A.B.

Referenced here:

arizona11912's picture

I wonder if its possible to have the margin requirements increase for Silver without creating a rush for delivery? Can anyone comment about that? Thanks

arizona11912's picture

I wonder if its possible to have the margin requirements increase for Silver without creating a rush for delivery? Can anyone comment about that? Thanks

arizona11912's picture

I wonder if its possible to have the margin requirements increase for Silver without creating a rush for delivery? Can anyone comment about that? Thanks

Iam_Silverman's picture

"I wonder if its possible to have the margin requirements increase for Silver without creating a rush for delivery? Can anyone comment about that? "


Ghoaster's picture

Obama did seem sad in his little tele-speech today, bummer. NOT!

Long-John-Silver's picture

It took two days to get over the ass kicking the S & P gave him.

When he did get his act together and present a "straight face" on TV the market took it's turn kicking him in the ass as he was speaking by dropping below 11,000.

NeroAmerika's picture

And if people were smart, they could have made a quick buck or two.  Everytime Obambi gets on TV the markets take a dump, easy money.

mynhair's picture

Oweblahma:  cue that 'deer int the headlights' pic.

Ponzi Unit's picture

downside of being a GS employee

mynhair's picture

Any info on that wierd volume drop in SPY?  Was watching the 5-min chart, and the vol died around 3:35p.  Related to the MS outage?  And is MS the only trader of SPY?

max2205's picture

What a great article. Thanks

Many have their convictions on hold. Praying for a quick deep selloff so they can get well on a short skullfuck rally