Tuesday, June 2, 2009

Markets: What Happened to the Bears?

"It's quiet out there"
"Too quiet"

The headline for Schaeffer's Midday Market Check "A lackluster session so far for the Dow Jones Industrial Average".

For the last week ClusterStock has been publishing photos of dead bears. Honest to goodness ursine carcasses. If you're into snuff pics see here and here.

Yesterday BloggingStocks had a headline: Closing Bell: Bulls above bears in food chain.

We are coming up on the anniversary of an event in the oil market that may bear [so to speak -ed] some resemblance to what has been happening in the equity markets.
On June 6, 2008 oil staged it's largest dollar gain in history. Here are some of our posts about that Friday:

The Energy Markets’ Circuit Breakers
The rallies in oil and other energy products have been so furious that they’ve set off rarely used trading limits, or circuit breakers, designed to keep commodity markets from spiraling out of control....
Reuters on Oil
This is Reuters front page at 3:00 p.m. EDT:


Oil's "stunning" rise 2:02pm ET

"Wild", "eye-popping" and "stunning" are some of the descriptions used by analysts as oil prices score their biggest gain in dollar terms in the history of the market. Full Article

The oil shock of 2008
Time to reassess the potential for recent oil price increases to contribute to an economic downturn....
And the next day:
Why Oil Spiked: Connecting the Dots with Eric Bolling

After talking to some folks who had been mauled [cute -ed] I decided that the short-sellers had just given up. It is no fun to be selling into the buying of Goldman and their long-only index clients, CalPERS, the universiy endowments et al.
So they said to hell with it. Oil continued to rise for another 33 days before peaking on July 9.
On July 29 I had this comment at Environmental Capital:
Mike @ 4:13,
Two separate thoughts in that first post.
As best as I’ve can tell approx. 40% of the move from $80 to $147 (25-28 bucks) came from “speculation”. I use quote marks because of the terminology problems most of the talking heads have when the subject is commodities. Speculators in commodity parlance take the other side of a hedgers trade, thus performing a societal good.
The problem was, until last week, the shorts had been beaten up so bad by the relentless flow of “investor” money that were out of the game. The $10.75 uptick on June 6 was their capitulation.
They covered and said screw it.
I personally don’t see any reason to allow the “investors” in markets for consumables. If they want an inflation hedge, let them run gold to a bazillion per ounce.
I don’t want to be pedantic but the use of the term speculator when talking about the index investors is confusing, so I get overly precise.
The fact that final demand didn’t move fast enough to maintain VLO’s margins is very telling in the “speculation vs. demand” argument.
When as accomplished a commodities trader as Paul Tudor Jones says oil is a bubble, I don’t need to hear the opinions of apologists or economists and other amateurs.
When he’s backed up by Wilbur Ross, who bought into a decrepit Indian airline as the most leveraged bet he could find on falling oil, I tune out the chatter.
The public pension funds said they were long term investors.
They just passed 20% in declines. The next 20% will test their mettle
I am hearing the same things, almost word for word, this time about equities. It may be a tell from the market.
So where are the bears? Yves at Naked Capitalism may have had a sighting.
They appear to be on R&R, getting ready to go back to work: