October was the worst month for the Standard & Poor’s index of 500 stocks in 21 years — since the 1987 stock market crash.
But the final week was the best week for the market in 34 years.
As befits such a wild month, it was the most volatile in the 80-year history of the S.& P. 500.
The huge gains of the final week were reminiscent of the sharp recoveries from bear market lows in 1974 and 1982. Both of those moves came while the economy was mired in recession, as it almost certainly is now.
If Monday’s stock market lows prove to be the low prices for this cycle, the bear market will have ended with the S.& P. 500 down 46 percent from the peak it reached in October 2007.
That would make the bear market almost, but not quite, as bad as the 1973-74 bear market, which ended with the index down 48 percent.
In the 2000-2 bear market, the fall was 49 percent.
The hectic market action in October spread across most of the globe. Remarkably, the American market was one of the calmer markets during the month. Several had more volatility and larger swings in prices.
Nor was the volatility limited to stock prices. Oil prices fell 33 percent during October, making this the worst month for that market since oil futures began trading in 1983. Oil is down to just under $68 a barrel, from a peak over $145 in July.
One volatility measure, shown in the accompanying charts, is the number of days in which an index closes up or down at least 4 percent.
In normal times, the market goes years without having even one such day. There were none, for instance, from 2003 through 2007. There were three such days throughout the 1950s and two in the 1960s.
In October, there were nine such days.
The accompanying chart shows the months, from 1928 through the present, when the S.& P. 500 had at least five days with 4 percent moves. Most of them were during the 1929 crash and the Great Depression.
Until now, September 1932 held the record for the most days with big moves, at eight.
Two days during October ended with the index leaping more than 9 percent, something that had happened only nine times in the previous 80 years.
For the week, the S.& P. 500 was up 10.5 percent, the best weekly gain since a 14.1 percent rise in the week that ended Oct. 11, 1974.
If the rebound this week indicated that the bear market of 2007-8 had ended, it lasted just over a year and hit bottom on Monday, at 848.92. It recovered to 968.75 by week’s end.
There were similar moves in most major indexes. The Dow Jones industrial average ended the week up 11.3 percent, at 9,325.01, and the Nasdaq composite climbed 10.9 percent, to 1,720.95.
For the month, the S.& P. 500 was still down 16.9 percent, the worst showing for the index since it fell 21.8 percent in October 1987. The Dow fell 14.1 percent, and the Nasdaq index lost 17.7 percent.
Both moves — weekly and monthly — affected every sector and nearly every stock. Only seven of the stocks in the S.& P. 100 fell this week, while just nine were up for the month.
Of the 30 stocks in the Dow industrials, only one fell this week. General Motors dropped 16 cents to $5.79 amid talks on a possible merger with Chrysler and additional government aid.
For the month, all 30 were down, with Alcoa turning in the worst performance with a decline of 49 percent. But in the final week, it rose 22 percent, ending at $11.50 after trading as low as $9 and as high as $22.35 during the month. It traded at more than $47 last year.
During the bear market, financial stocks led the way down. The S.& P. financial index fell 65 percent from the high it reached in early 2007 to the low close on Monday. By Friday, the index had recovered 17 percent.
Internationally, Russia led the volatility parade, with an astonishing 17 days with 4 percent moves in the Micex index. It might have had more if Russia had not closed the market on Oct. 10, fearful of the selling panic that was sweeping the world.
That index ended the week up 42.5 percent. For the month, it was still down 28.8 percent
Many countries, among them Britain, Japan, India and Brazil, also showed more volatility than the United States.
That volatility was so high everywhere was an indication of how linked markets have become in the age of globalization. It is not just that most industrial countries appear to be in recession, or close to it. Another factor is that investors now own portfolios of shares from around the globe, and in times of stress may sell what they can, instead of just what they want to unload.
The period from 2003 through 2007 — when there were no daily moves of at least 4 percent in the United States — became known as the “Great Moderation” to some economists. That very lack of volatility encouraged investors to take more risks by borrowing money, and encouraged others to lend it.
All of the big days in September and October came after Lehman Brothers was allowed to fail. That Lehman was not deemed important enough to save signaled to investors that there was risk where they thought there was none and caused a sharp tightening of credit for many borrowers, despite efforts by central banks to push interest rates down.
The big advances, on Oct. 13 and again on Tuesday, came as hope grew that the financial system would be protected. The first came on the Monday after the Group of 7 finance ministers promised to take steps to protect banks. This week’s big move came amid indications that central banks would aggressively cut interest rates.
Such wild volatility may be an indication that a bottom was reached. The biggest week since World War II did come at the end of the 1973-74 bear market, and the biggest week in the 1980s, a gain of 8.8 percent, came just after prices hit bottom on Aug. 12, 1982.
Or the wild moves could just show how baffled investors are by a series of events unlike any they can remember.
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Second Biggest Dow Points Week Ever Ends On Weak Note
A 787 point gain on the Dow this week, second only ever in absolute points gained to w/e 10/31/08, ended on a disappointing note as equities gave back significant early gains around the NFP print to end the day practically unch (128pts off the highs). Equities underperformed credit on the day with another strangely impressive (given NAV and HY spread differentials) outperformance by HYG. On a medium-term basis, equities began to revert back to where broad risk assets are more supportive but on a short-term intraday basis, risk assets (most notably EURJPY, AUDJPY, and TSY levels and curves) were in a more aggressive derisking mode. ES definitely maintained strength for longer than many expected today before giving it all back into the close, but financials (especially the majors) were surprisingly positive even after such a good week - quite a squeeze.
Index arbitrage activity was noted in HY but we fear some over-exuberance in retail buying of HYG - especially given how rich it is trading to NAV. It is interesting though that on an intrday basis, HYG-SPY-VXX-TLT all clung very tightly to their empirical-based relationship (which perhaps also helps explain the outperformance of HYG over HY).
But on a broader basis, risk assets in general were more positive - being dragged upwards towards equity and it reverted back towards support. Whether pre-bailout regime of CONTEXT is applicable is questionable but it does provide a perspective on equity's move this week relative to FX carry, commodities, rates, curves, swaps, and spreads.
On a short-term basis, CONTEXT was more negative today (based on the very recent market microstructure) as EURJPY and TSY (levels and curve shape) were more in a derisking mode. The following chart shows TSYs performance this week - certainly doesn't looks like the step function uptrend we saw in equities. Although the long end rose 10bps (which we suepect is more repatriation flows), the short-end ended the week only marginally higher in yield and all dramaticaly off their highest yields of the week.
Modest USD with swissy weakest versus the USD and SEK strongest among the majors, was interestingly ignored as Oil and Copper managed gains on the day with Gold unch and Silver down (almost exactly matching USD's move on the day).
All-in-all, following Europe's weak close, it seems the midweek exuberance is wearing off and the reality that is December 9th's deadline and the near-impossibility of the task ahead is leading to some different asset allocation decisions into year-end. Financials' strength is surprising, but we ponder the magnitude of TLGP maturities they faced this week and next and maybe this was a helpful distraction.
And for those curious how the biggest rally ever looked like from the perspective of October 31, 2008, here it is courtesy of the NYT's Floyd Norris. Little did he know what was about to ensue in the world:
It was the former, and unless the global central banks had unleashed the most epic period of global moral hazard and financial bailouts, we would be living in a totally different world right now.
Charts: Bloomberg and Capital Context
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I have a message for Ben : **** you .
Don't censor LOVE! The heart wants what the heart wants.
I too have a message for Ben: FUCK ***.
no big deal,lol
http://expose2.wordpress.com
Didn't you read CNBC headline? "Dow up wooping 7% in a week!".
Wow! At this rate, Dow will be 30000 by Xmas. Bernanke just has to drop the phucking swap line by 5%/day.
Ends on flat note.
Bad concerto, bitchez
Aren't you a sharp one...
+1 for wit my friend
Coincidentally, today's spot chart for gold looks like a big middle-finger fuq you!
Bad guys are wielding a giant 1,750 monkey hammer.
ES once again failed to hold above the 1245ish neckline level...two essentially flat sessions following an historic surge doesn't exactly inspire confidence imo
I don't know whether technicals can accurately provide any semblance of guidance in these zombie markets. MainShitMedia will conduct their usual touting next week leading to the next "uber-crucial" Euro summit BS lipservice, which could either push everything up in "hope & anticipation", drag it sideways, or after a wrong word in the Cameron vs. Merkozy encounter everything could come tumbling down as the last bastion of hopium collapses and it's back to reality and long-gone fundamentals for a change.
I don't know whether ANY rational tool could provide any semblance of guidance in these zombie markets. I mean, let's think about all that happened this week:
1) S&P downgrades 37 banks
2) China's PMI falls off a cliff
3) US unemployment decreases but only because people are leaving the labour forcce
4) World's central banks pull a co-ordinated move
and the rest of the news is mainly bearish to downright frightening when you think about it i.e. overleveraged European banks unable to borrow USD short-term etc.
And what happens - RISK ON!
Does. Not. Compute.
I would not buy BAC or even touch it with a bargepole - yet the bloody thing jumps 12% in 3 days! Same with JPM, MS etc. WTF is going on here? No one knows what sits on their balance sheets, but all of a sudden - one band-aid and it's all OK.
No point in trying to apply logic on this. Wednesday's action was what sparked the ridiculousness, albeit done to mask whatever almost bank collapse. After that you have the global media frenzy who lured whatever -human- momentum chasers left, vicious short covering after hedge funds were piling in and S&P's 37-bank downgrade became far forgotten history (over 10 hours), along with a complete glossing over China's deteriorating PMI (Dec 47.7, Nov 48, Oct 51 - Spot a pattern?) and there you have it.
The market is starving for a glimpse of positivity in this climate, and by market I mean the algorithmic warfare coupled with the insiders dark pool trading, which will bid everything to oblivion until the rest of the suckers cave in and start gaining their naive confidence. After which they will buy everything the first will gladly dump on them.
As I said earlier, next week is what is all about, with yet another "crucial" "final" "game changing" "make or break" EU summit. MSM will have a field day/week polishing this one, and I really can't speculate on what will happen because Merkel want's "fiscal unity" and "stricter budget discipline", while Cameron simply wants the ECB to start printing without any treaty changes, which I guess will jeopardize the City's standing as a financial center (and only source of UK revenue).
As for BAC, I don't know what kind of moron would touch that thing other than the grandest moron of them all, Dick Bove, who assumed the role of BAC's defendant, back when the bank's book became public, revealing the billions of toxic malaise.
I would like to use technicals the way I used to, but I find myself unable to do it at these times due to the continuous intervention by politics or media. I think I'm more confident using it during long bull runs when things seem more "peaceful" and resemble a more "normal" market condition, since everyone's buying to make money, selling to lock profits, and everyone shuts up.
Lastly, during the past two years, I have noticed that my favourite risk on indicator, is FTSE AIM, which is packed with the most riskful of equities, be it penny shares or mid cap oil explorers & miners. The index was assuming a vertical trajectory post QE1 & 2, while now it hasn't moved at all. And if nobody is willing to pick the cheapest and purest gambling shares, which constitute the majority of the index, then I see clear lack of conviction as well of confidence.
Regarding Cramer et all - I never watch CNBC because my liquor ain’t that hard.
agreed...but here is how i see it short term, at least as far as price action is concerned...
huge rally on wednesday following coordinated CB action which i would interpret as a knee jerk response
no follow through thursday or friday which seems to indicate a lack of conviction on the part of buyers imo
ES seems to be pushing up against real resistance at these levels, of course we still may see a convincing follow through next week, but given the current environment that seems less likely, i think, than a pullback
edit: neglected to mention todays gravestone doji
With "technicals", at least you have a clue. Otherwise, you're forced to rely on "Cramer" and the likes...
However, CRIMINAL manipulation, seems to always win out!
Go ahead, pull up a chart, add your favorite indicators and watch the CRIMINAL manipulation! can be fun
I would say this market is a joke but that would be redundant.
When the Dax/EuroFinancials were rallying during Merkel's speech, I knew my shorts were in trouble. The market always dropped in the past on all the typical Merkel-memes: "no to monetizing", "no to Euro-bonds", "yes to long process of fiscal consolidation" here all repeated in the Bundestag. Granted, the market was willing to rally into the last EuroPowWow--fool me once, etc.
I knew my shorts were in trouble.
Hope that's not a frequent problem.
HE KNEW HIS SHORTS WERE IN TROUBLE,WHEN HE SHIT THEM.
That 787's gonna crash.
the 7% solution!
how do you say that in italian, i wonder?
we shorts got killed this week!
How about next week?
I don't know - and don't want to predict anything in this crazy irrational market.
Maybe they looked at the employment data more carefully?
A Closer Look at Unemployment: Did it REALLY Fall to 8.6%? Actually, Employment Fell By Almost 200,000 http://confoundedinterest.wordpress.com
The stock market has as much to do with economic reality as detailed figures on the industrial grain output of Lothlórien elves.
One ring to bind them all...
Just pull up today's oil chart, the chart for ES, and the chart for the US dollar. If you can make sense of those three charts on the same day, well then your drugs are much better than mine.
Pull out the chart on any day. Oil has been going between $5 hourly swings every day for the past two weeks. Demand means nothing. if inventoried come in higher than expected oil barely budges to the downside. Oil comes in a few barrels less than expected it shoots up 3%.
Yeah sure it's demand based trading.
And gold can't break $1750.00...????
YaOkee dokee,move along folks,No manipulation here.....
Timmy sucks horse cocks,and don't even choke....
He swallows too.....
Fuck you you little weasel.
So Sept 1932 held the record for most days with a 4%+ move in either direction up until Oct 2008. There was not one day from 2003-2007 that had a 4%+ move, wow. That puts the past few months into context. The past four months have seen the greatest gyrations in the history of the stock market.
It really is worth noting that unprecedented government intervention gave 1932 its great gains but little did they know the worst of the depression was still ahead. Bernanke and co believed the government did not do enough back then and thought he could prevent a second Great Depression.
WELL YOU WASHINGTON FUCKS, LOOKS LIKE WE ARE IN 1932 ALL OVER AGAIN, Also looks like it has been proven beyond a reasonable doubt that government intervention in any form leads to only one conclusion, TURNING RECESSION INTO DEBILITATING DEPRESSION.
We also got along quite well up until the early 1980s when oil, cattle, and other futures began trading on the open market. People make it seem like oil futures have been traded since the beginning of time. Nope, just since the end of the age of prosperity when the age of technocratic theft began. 1984 is not just a book, it really does mark the date of freedom's plunge to extinction.
This is the bankers using tax payer funded bailouts to play with the markets so they can take as much money as possible out and flee to their South American, Asian, and Island fortresses before the bottom falls out. Main street has been in a severe economic depression for over 4 years now. The only thing masking it is 99 weeks of unemployment payments and 50 million food stamp recipients.
it's called hyperinflated depression, someone got to study this in Princeon one day. Bernanke will be remembered as the most moronic chairman of the FED of all time.
Does this mean I can buy that new Vette, now?
"Quick, Ben, grab the defibrilators and shock-n-awe this bitch! The economy's going into liquidity arrest!"
WEEKLY options expiration rules every Friday now.
swings n balances, don't let the size impress you. I'm referring to the rise. Its roller coaster time and will stay that in election year. We are in for large twists n roundabouts.
you know why that happens so much don't you. We have more hft than anyone with less holding period and thepeople running it up and up where it shouldn't go are never holding it over night, etc. we have the worst capitial markets in the world
SP500 bull vs bear battle reverts to bearish bias after price action on Friday and more downside expected.
My long term indicators have continued to warn of US Dollar strength and EURO weakness and these signals have increased since 2009. The overdue dollar rally should be substantial.
http://stockmarket618.wordpress.com