You saw it all unfold here blow by blow yesterday. Now Art Cashin gives the post-mortem.
Source: UBS Financial Markets
Greek ATM Lines And Expiration Bluffing Send Stocks South – Tuesday's trading turned strange even before the market had opened in New York.
An oversold condition and decent data at 8:30 had U.S. futures bubbling on the upside early on.
Suddenly, around 9:00 EDT, lightening seemed to strike. Futures tanked and European markets went into a freefall.
"What just happened" was the cry that echoed across the floor.
The trigger was the announcement that the Greek President was disbanding the last effort to form a coalition government.
Media pundits wondered what was the surprise. Wasn't this expected?
The answer was – yes it was expected but now it was a fact. The power to resolve had shifted from a roomful of professionals to the streets of Athens. Compromise was no longer a possibility.
The sense of hopelessness was underscored by rather vicious selling in the Greek bank stocks.
U.S. stocks tried to resist and opened mixed but wary.
For the balance of the morning, the bulls tried to mount a rally off the oversold condition, produced by days of selling.
After Europe closed at 11:30, U.S. stocks mounted a bit of an ostrich rally. (If I can't see it any more, it can't hurt me.)
The ostrich rally took them to what would be the day's highs shortly after noon. Then the ATM rumors began.
The rumormongers and several blog sites claimed that Tuesday evening in Athens, long lines were forming at various bank ATM machines. Soon the blogs were relaying pictures of the lines.
The concern was that this might be the spark or trigger of the feared run on the banks that would signal the final inning of the Euro exit.
At first the ATM stories circulated slowly – more a topic of conversation than a prod to market action.
As it spread over the next two hours, the reaction was more buyers walking away, rather than panicky selling.
That all changed around 2:30. The ATM rumors combined with reports of large bank withdrawals on Monday. Selling began to accelerate.
At almost the same time, a lot of market on close (MOC) sell orders began to show up. In an Expiration week, there are often large MOC flows. The fact that they were predominately sells, added to the pressure on the market. If you thought there'd be heavy selling as the bell was ringing, why not sell now at likely higher prices.
That perception seemed to stimulate the selling even more. The volume began to swell.
Then at 3:30, the bluff was revealed. Suddenly, a string of buy side MOCs showed up. On balance, the bell would now see mild buyers, not sellers. That revelation reversed gears with buyers helping to cut losses a bit.
Was the shift in MOCs a set-up? Was it a trading ploy? We can't tell for sure but it sure was an odd coincidence.
The late flurry of selling in the final 90 minutes swelled volume to the top end of projections. Traders wondered off to marinate and wonder what the ATM story boded for Wednesday morning.