Open Thread: Fundamental, Technical or Psychological Factors ?
On CNBC today, someone blamed today's selloff on the weekend Barron's piece trashing Phony and Fraudy.
That raises an interesting question: Why would a Barron's article, with essentially no new information in it, send Fannie down 22%, Freddie down 25%, and whack 2% off of the markets?
Our favorite bulls are going to call "retesting the July lows" but I doubt that is all there is to this.
Putting questions about Efficient Markets aside, what was today's action all about? Was it really the Barron's Bounce Trounce, or was it something else?
My own guess is that Investors are begrudgingly recognizing that the financial system has major problems, real estate is in a secular decline, and that the economy is teetering into a recession -- and none of the above is likely to be fixed anytime soon.
~~~
What are your views? Any of the above ring true?
What caused today's major whackage, how long is it likely to last?
What say ye?
Monday, August 18, 2008 | 07:30 PM | Permalink
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Tracked on Aug 18, 2008 11:46:33 PM
Comments
Volume was light due likely to summer vacations but me-thinks that we're headed for another significant leg down the markets below the July 15th low water mark. Once the summer unofficially ends on Labor Day, we'll know for sure in the following 4-8 weeks.
Posted by: Jeff | Aug 18, 2008 7:42:42 PM
I think its people pulling their heads out of their asses and realizing we all might be faaked... (pardon the french)
Of course that's my opinion and not much more! :)
(I think that would count ad Fundamental!)
Posted by: nades | Aug 18, 2008 7:45:08 PM
The PPT ran out of checks. Not to worry. Lots more on the way.
Posted by: Bluzer | Aug 18, 2008 7:49:57 PM
Markets are like a headless chicken, don't have vision to see where they should be running. Actually they know it will end a lot down but no clear idea "when" it will be heading down, so people are day trading in herd mentality trying to make a buck up a buck down.
Eventually it will test new lows, then go up and test new lows again, all the way to sub2000s for nasdaq (at which time I will remove IXIC1881 from my name)
Posted by: Mich(^IXIC1881) | Aug 18, 2008 7:50:42 PM
My two cents…
1. Present: Current fundamental economic conditions are, simply put, negative.
2. Moving forward: Overall economic trends are also negative. Check out the unemployment graph; clearly wrong direction.
3. Not at the bottom yet.
Cheers~
Posted by: Penguin | Aug 18, 2008 7:50:46 PM
range is spy 120-130 and could not break above 130 convincingly so down we go. demand destruction is going to include a lot more than oil, commodities, over-priced housing etc
Posted by: scorpio | Aug 18, 2008 7:59:35 PM
Maybe the market's are starting to wise up to the dog and pony show for what it really is and who it really involves. Problem is; so are many of our foreign creditors.
Posted by: Pat G. | Aug 18, 2008 8:00:41 PM
"Our favorite bulls are going to call 'retesting the July lows' but I doubt that is all there is to this."
I don't think the July lows get tested till next July. Falling oil prices and Treasury note yields under 4% are a bullish dream.
I'm gonna load the boat later this week, after this petite selling squall is over. Barron's is ALWAYS WRONG. I will fade those ink-stained Dow-Jokes MEDIA SUCKERS till the cows come home. And I will make long green doin' it.
If journalists could trade they way out of a paper bag, they wouldn't be scribblin' for THE MAN. Nor would they have frayed collars and cuffs. I rest my case.
Posted by: Jim Haygood | Aug 18, 2008 8:03:33 PM
hmmm... let’s seeeee…
"The market" is primarily over testosteronized males. I'd say “the reason” is because the testosterone level was reduced from last months highs. Probably because:
`merca is looking a bit weak.
The future is looking a bit dim.
The other “trading males” aren't participating in as many "high-five dances".
So, just males issues. Don't worry; the stupidity will come roaring back. All we need to do is invade somebody.
Dude, like totally, dude, we’re gonna kick their azzes. Like, yeah dude, TOTALLY! Let's buy some stocks dude, this war is gonna, like - totally, rock dude! (high-fives all `round!)
Posted by: John | Aug 18, 2008 8:03:45 PM
My view is that most of the up days are program driven, so there is little there, there.
The fundamentals are worrisome (to say the least) everywhere you look. If this isn't bad enough our two candidates are talking to a power mad evangelical, venting testoserone over Russia, and otherwise ignoring the financial crisis. If one sits back and looks at all this how can you be positive?
There is also a fear that this "whackage" is merely the first spank in a long spanking session. Besides Spitzer, this prospect does not cheer anyone.
Posted by: larster | Aug 18, 2008 8:04:05 PM
from Hussman "...blowout in credit spreads, now extending beyond financials and into a broader range of corporate debt..."
and the credit markets have been out in front of the equity markets for about a year.
Posted by: cap | Aug 18, 2008 8:04:30 PM
OT but I thought I would share...after the fake fireworks, fake singing, now it is reported that...
- The always smiling girls at the ceremony apparently were stripped naked during recruitment, their bone measurements taken (shoulder, legs, breast). They were asked to be able to smile extended times and be cute
- The soldiers were given diapers
Human rights, anyone? Neah, not in China.
Posted by: Mich(^IXIC1881) | Aug 18, 2008 8:05:41 PM
More than with the rest of the commenters. Besides payrolls turning negative YoY (and ignoring the B/D adjustment) the BLS just updated real wages and the weekly is down -3.1% ! That's a real big deal - even if inflation dampens down. In my estimation we're already in a growth recession, define as YoY growth less than 2%. Well guess what - despite the headlines Q2 was 1.8%. But..with wages plus employment turning negative we're crossing a major tipping point. Laid out the charts for all this in this post: http://tinyurl.com/6r6pwm
which walks thru the major components and takes many of them back to 1960. IMHO though most still see none of this clearly. Wrong instruments and foggy panels.
Posted by: dblwyo | Aug 18, 2008 8:10:01 PM
Folks are waking up to the fact that ... it's 1973 all over again!
Posted by: steve roy | Aug 18, 2008 8:17:30 PM
My friend Paul asks me "you're not being serious about the Barron's article, are you? no new information?"
Yes -- I believe what that article did was force more contemplation of previous knowns, and it was therefore psychological, not informational. At the very least, Barron's can legitimize a viewpoint that might not have been seriously considered before.
Posted by: Barry | Aug 18, 2008 8:17:49 PM
At least in a psychological sense, that constitutes news. markets move on memes, and there is a meme taking hold that Freddie/Fannie's likelihood of a shareholder washout is rising from 75% to 95%
Posted by: Paul Kedrosky | Aug 18, 2008 8:19:58 PM
I see a pattern developing during this credit crisis:
1) [As markets are falling]: The markets are way too low. The economy is strong.
2) Oh crap, maybe this isn't good [markets continue to fall]
3) Markets aren't going to zero, therefore it should be going to infinity [markets rally]
4) Wait, these companies don't have a business model and aren't making money! [markets fall]
LATHER, RINSE, REPEAT.
I don't think this ends until the companies at the epicenter (I-Banks, FNM/FRE, Homebuilders, etc.) start to prove that they can consistently start making money again... Meanwhile, I won't hold my breathe
HCF
Posted by: HCF | Aug 18, 2008 8:20:06 PM
The administration is clearly leaking stories about a takeover of the GSE's to prepare the markets. The Baron's article is just one part of the information campaign.
Step 1. No, we won't.
Step 2. We need authority to but we won't.
Step 3. We could but we won't.
Step 4. We won't unless we need to but we don't need to.
Step 5. We won't unless we need to but it is not likely that we will need to.
Step 6. We will if we need to but it is not likely that we will need to.
Step 7. We will if we need to but we don't need to right now.
Step 8. We will if we need to.
Step 9. We have...
Posted by: Rajesh Raut | Aug 18, 2008 8:20:09 PM
The facts don't matter until they do.
Posted by: Mike M | Aug 18, 2008 8:20:50 PM
It's always technical.
The move from the July lows is taking the shape of a rising wedge type formation. Not good. It would take an extremely powerful rally very soon to negate the rising wedge formation.
Today's action looks like it took out the lower trend line of the rising wedge, but it's not decisive, yet. Any more downside tomorrow and it will look very, very bad.
From the Elliot Wave perspective, I think we're about to launch into a Wave 3 within a large degree Wave 3. I personally hope for the U.S. that is not what we're facing. It suggests a move to 1000 on the SP500 with a few months. In other words, hide the sharp objects and shower curtains.
Use a break below 1270 for shorter term sell stops. If 1243 - 1225 zone doesn't provide support, then get the women and children off the streets....it will get very, very ugly.
- AT
Posted by: Andy Tabbo | Aug 18, 2008 8:26:39 PM
Make certain that you are looking out of the correct window.
If you are, what you are seeing is an almost hourly back and forth between Medvedev (as mouthpiece for Putin) and Rice as Russia probes (by refusing to actually pull back) the weakness of the United States (lame duck Cheney Admin., exhausted army and busted economy).
This is dangerous and the market does not like it at all.
Really dangerous if an impasse results in which Rice issues an ultimatum of some sort, Putin calls the bluff and Cheney does somethin' stupid.
Posted by: esb | Aug 18, 2008 8:29:01 PM
Random event. Like most days. Anyone in the market who hasn't seen reality yet is likely never to.
Posted by: rww | Aug 18, 2008 8:29:49 PM
Barron's has become nearly as good a contrary indicator as Business Week. Some of Phony/Fraudy equity holders may have noticed the widening CDS spreads over the weekend, which to me is much more intriguing than 20% moves in single-digit stocks. I think a literal interpretation of Treasury's statements admits the possibility of allowing some MBS to default--and after last week, the thought of stiffing the Russians must have crossed somebody's mind.
Posted by: Namazu | Aug 18, 2008 8:29:55 PM
Hi, I thought we already am in a recession. You know, whenever we have bad news, the bulls say that is the bottom... Everytime my shorts go in the black, the market goes up...
Posted by: Boris | Aug 18, 2008 8:35:09 PM
non-linearity is the new volitility.
Posted by: Mark E Hoffer | Aug 18, 2008 8:48:07 PM
