Traders Respond To Yesterday's "Insane" Market Rebound

"how the market moves today is really anyone’s guess. As the end of 2018 approaches, price action is becoming ever more bewildering." - Citigroup

The last week of December has, traditionally, been the quietest week for the market. Not so this year, when the market is set to close out 2018 with three days for the record books: first, a record Christmas Eve plunge in the S&P, followed by the biggest point gain in Dow Jones which soared more than 1000 points the day after Christmas Day as a massive, $64BN pension asset-reallocation program kicked in, and finally concluded with a historic, "insane" intraday reversal which saw Dow soar nearly 900 points off its session lows in 90 minutes of trading thanks to the 4th largest buy program of all time.

The result, as Bloomberg puts it, "Wall Street mouths were again agape at the sight of frantic moves in equities."

And as traders beg for at least a little stability to close out the week and the year (with just one more session left after today), and look for the pension fund buy program to continue the rebound to extend, here is a sample of trader reactions to both yesterday's unprecedented move as well as the overall insanity in the stock market, courtesy of Bloomberg:

Nancy Tengler, chief investment strategist at Tengler Wealth Management:

“There’s a couple of things going on: one is that the tax-loss selling is most likely done. People, like me, who try to do it for clients, tried to do it last week. That improves liquidity in markets. There’s buyers and typically what we see in a normal market if people believe the economy is sound and that earnings will be decent, is they’ll tend to buy the dip. We saw some of that today. There was no major news that prompted the reversal. And buyers tend to come in at the end of the day, especially with program buyers. That’s a lot of what we’re still seeing.

Some people said this is what bottoms look like. I don’t know if we are at the bottom yet. I’m not saying we’re not, but sellers are drying up because of tax loss harvesting and you have end-of-the-day buyers coming in. I had a sense we’d end up today, but you certainly never know.”

Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance:

Typically you look at the last hour of trading and see where professional money is. Yesterday the markets was up for most of the day, but we had a dramatic rally in the last hour of trading, and the same thing today -- it was flat for most of the day and then rallied in the last hour. It could be a lot of mutual funds and institutions buying. It does seem like a switch in sentiment -- from being a seller in every rally to buying the dips now.”

“We are seeing investors bringing the market pricing back in line with fundamentals. Over 90 percent of stocks in New York Stock Exchange traded higher on Wednesday - that was crazy, it made me think - maybe the bottom is in. Maybe it’s a very late Santa Claus rally. Being down 20 percent without a recession doesn’t make too much sense. Maybe people were waiting for the last minute and once we got really close to 20 percent they decided to buy. I wasn’t one of them, but after what happened yesterday I was. It looks like the bottom is in.”

Gary Bradshaw, a portfolio manager at Hodges Capital Management.

I compiled a ‘To Buy in 2019’ list on December 7 and I just looked at it again - I couldn’t believe how much they’ve plunged since then. I said ‘That’s it, I need to buy,’ and so has everyone else. The market has turned the corner - fundamental are strong, the economy is doing well, the consumer is strong, the bull markets is still intact. It’s a screaming buy. Everything that could go wrong has gone wrong. The negative news is out there - and investors said, give me some positive news - a good holiday season for retailers, the absence of negative headlines on trade, and we’ll buy.

John Carey, managing director and portfolio manager at Amundi Pioneer Asset Management

The market just got a second wind and decided to go up a bit in the end after having been driven down so much in the past few weeks. It was because bargain hunters are still looking for stocks that could do well next year if earnings do hold up and the economy stays reasonably strong. It’s been a real roller coaster ride. I normally expect calm markets and low volume during the last week of the year. You can have some more trading activity on New Year’s Eve because people are tidying up their portfolios and getting ready for the new year.