Orphaned Markets

Tyler Durden's picture

From Peter Tchir of TF Market Advisors

Orphaned Markets

I've used the analogy that the markets have been relying on doting "parents" such as the Fed, IMF, ECB, EU, DC, etc.   On many days, the upward move in stocks has been based on either outright support or the hope of outright support from some government entity. 

Whether the parents are dead may be debatable, but they are certainly missing.  The Fed statement was the last straw for the markets.  Ben disappointed.  Plain and simple, Ben delivered nothing particularly new and exciting.  It is not the fact that he mentioned the economics risks are increasing that caused the sell-oof, it is that he mentioned that without giving a nice shot of QE.  Did they avoid QE because even the Fed now realizes it increases commodity prices along with stock prices while providing no real benefit to the economy?  Whatever the reason, the result has been lost faith in the willingness of the Fed to boost stocks at every opportunity.

Similar reaction occurred when after 2 days of "conference calls" for Greece and the IMF resulted in only an announcement that the inspections would continue.  There was no instant gratification for the markets, and if anything, it was made clear that this is near the end of the line.  It shouldn't have been a disappointing outcome, but yet it was.  Why?  Because they under-delivered.  The markets have come to expect so much, that only real action will help now. 

Story yesterday of "helping" the weakest 16 banks in Europe to recapitalize was met with a strong rally, quickly followed by a sell-off to new lows.  The realization that the EU has gangrene and decided to deal with some warts brought back the fear the the governments are once again behind the curve and just don't get it.

Then we rallied into the close because the G-20 would of course save us.  So far, not so much.  A wishy washy statement is just not enough for a market that has come to expect (if not depend) on more. 

The BRIC's are supposed to ride to the rescue, but in Brazil, the currency has been getting crushed, Chinese CDS is hitting new wides.  Brazil is busy imposing tariffs on China.  Russia is complaining about Chinese dumping.  Hardly the signs of a co-ordinated effort to rescue the world. 

So many people have been asking "What has changed?" in the past couple of days.  "How can we have gone from 1,220 to 1,120?"  The answer, to me is clear, a loss of faith in the ability and willingness of the governments to write checks to support the stock market.  I ask what happened to make stocks futures go from 1,120 on the 12th of September, to 1,210 by that Friday?  That to me is just as legitimate a question.  And the answer is clear - the market still believed that the governments were there to give the market whatever it whined for.  Every pop that week was directly a result of some government or quasi government action or rumor.  That rally occurred with Retail Sales disappointing, surprisingly bad Jobless Claims, weak Empire Manufacturing and Philly Fed. 

Rather than looking at the past couple of days it is better to look at the market over the past 2 weeks.  During the past 2 weeks we are about 10 pts lower on the SPX.   Given the awful data coming out across the globe and the admission that many policies have done almost nothing to solve the core problems, maybe we shouldn't be so excited to "buy the dip"  And in spite of how weak the market has been, about 90% of what I have read or heard today, tells me investors are still dying to get long.  Everyone seems convinced we bounce.  Even the bears are more willing to wait to see if we break down before adding to shorts.  Please look at the other rants or useful comments you get and see how many are saying this market should be sold?  The stuff I am seeing is overwhelmingly of the nature "it is bad, but it is priced in and we are due for a massive bounce".   Some of these talk about the G-20 and even the Fed adding some QE.  If anyone things that a 10% move in stocks in a couple days will make Ben change is mind, I think they are horribly wrong.  In fact, maybe this move will make him realize he has done too much and he has to let things settle.

We may get the relief rally everyone is looking for, but I have believed stocks should be below 1,100 for awhile.  The data since I felt that has been supportive of my view.  The (in)actions of the government now make it more likely that we get there or much lower.  Play the dip if you want, but I think that is being far too cute with your money in a very dangerous market that more and more has to stand on its own and can't have its hand help by "Ma and Pa" Fed.

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Pool Shark's picture



Well, I guess the hyper-inflationists were wrong,... again...


lapedochild's picture

I don't see the allure...Please enlighten me?

SilverRhino's picture

What the FUCK happened to the silver market???

$32.68 ask -3.92

Pool Shark's picture



Same thing that happened in 2008: de-leveraging.

Cash is King [at least for the time being...]

[really bad JuJu...]

PY-129-20's picture

You could've asked the same about Cotton, Orange Juice, Palladium, Platinum or Copper: de-leveraging.

oobrien's picture

I told you motherfuckers that deflation will rule the day.

Yet you look at me like a retard.

What's a boy to do?


AUD's picture

Ben disappointed

Fuck, are you people blind? Ben has promised massive profits in Treasury bonds. For every halving of bond yields, prices more or less double.

Why do you think every man & his dog are selling gold, oil, stocks etc etc & piling into Treasuries, because they're safe or something? They are going to be repaid? You can roll them up & masturbate with them?

youngman's picture

I agree with you.....we rally on bad news...agorythims...or what ever...all the time we KNEW Greece would default...and that we as a western world are much more exposed than what they are "speeching" to us...but what has me baffles is why people would dump gold and silver....it shoud be skyrocketing in my little Econ 101 mind....I am baffled and waffled..and slathered all over with crow....I just don´t get it.....If I was China today.....I would be buying 2000 tons of gold...easy decision...very easy...wierd

janus's picture

right now is just 'going'; where it's going remains to be seen.

i think it has to be gold and silver; fear drives the gresham principal into high gear.  all weaker currencies must first cede to the dollar, and then the dollar eventually cedes to gold and silver.

this all has to happen.  i've aleady bought some phys this moring.  i'm holdin out incase it drops to mid 20s; i which case i'm pouncing.  if not, we'll  know when it crosses back over like 36-37...until then it's just a matter of gettin the most for the dollars, and getting ahead of that gresham curve. 


MonkeySmoke's picture

This is a great swap opportunity--GSR is around 52:1--swap gold for silver and then exchange as much fiat for silver as possible. That is my plan. Who knows, if I wait until Monday the GSR might be higher, but it might be lower. This should be a very interesting weekend. My guess is, the G20, IMF and all the world "leaders" that are meeting at the UN will all hang around and "discuss" next steps behind closed doors and out sight of prying eyes and microphones.

janus's picture

thanks for that; i'm going to see what all that entails.  that's kinda where i am.  i think i'm gettin a decent handle on markets themselves; now i need to learn the mechanics of manipulation -- in other words, when i see something clearly, i need to learn how to manuver myself to profit from it...and not just a percent here or there; i wanna start cashing in on all this free wisdom from ZH.

i think i'm gonna learn the delicate art of 'puts'. 

i just wish there was some sort of book that told you, 'when you foresee a big move in some currency, this is the most profitable way to turn it...or, when you know something is going to happen in the bond market, use such and such mechanism to smash their heads in...'

anyone know of such a book?

DebtSlaveZombie's picture

The dreaded "L" word.  Liquidations.  The silver market is very small so even one hedgy having to meet a margin call would roil the silver trade.  Probably no bids to meet the ask volume, therefor.....massive drop to hit the bids.  I wouldnt be surprised if gold and silver hit 1500/25 in the next 20 days.  This correction is gonna be swift and fierce, so if you're leveraged, good luck.

They Cant Short The Sunset's picture

Profit taking, banks dropping their shorts?!  Looks like a buying opportunity.

msmith's picture

EURUSD price action is breaking down again. Expecting another drop soon. EURUSD Market Report is available here http://bit.ly/n8SsO6

Fate's picture

I don't give a damn WHY silver is down.  It's a buying opportunity.  BUY ON THE DIPS.  Anything below $50/oz. is a bargain; below $40, it's a steal.

max2205's picture

Spx 1,000 maybe what you tell your grand kids. I remember when the SPX was over 1,000!

Sorry grandpa

Temporalist's picture

Oh how Hank Paulson looks like Daddy Warbucks for these new orphaned markets...just like he was in `08.


The Sun'll Come Out...after the Greatest Depression.

janus's picture

great work as always, mr. tschir.

Miss Expectations's picture

"Whatever the reason, the result has been lost faith in the willingness of the Fed to boost stocks at every opportunity."

Listen, Ben is just a shitty mechanic.  He's been using nothing but starter ether for years.  In furtherance of my analogy, here's a video about what ether can do...It can destroy your engine...



eddiebe's picture

Mr.Tchir, I would like to know how you come up with 1100 for SPX? What is worth how much and compared to what??The Fed has been hinting that their efforts have been to buy treasuries in order to support stocks in a round about way, when in reality they have been herding everyone into bonds. The way I see it the big boyz game is to get everyone into the bond and then do the old switcheroo.

 They will do it when they have most everyone trapped. This could be the last time they shake the tree, but I doubt it. I also doubt that buying bonds at the top after a 30 year bull market is good strategy. Not at all!

Cursive's picture

I ask what happened to make stocks futures go from 1,120 on the 12th of September, to 1,210 by that Friday?  That to me is just as legitimate a question.  And the answer is clear - the market still believed that the governments were there to give the market whatever it whined for. 


Bullshit!  I'm losing any respect for Peter Tschir with this utterly naive statement.  Markets moved from 1120 to 1210 last week because it was opex and the MM's were losing their ass on options expiry.  The house always wins.*


* Until it goes bankrupt and is bailed out by government, which is another sort of win.