Wednesday, June 1, 2011

I love the Short Side but This Could Get Concerning

It appears that the herd has gotten spooked.
DJIA down 274, S&P 500 down 29.

From our February 2, 2011 post "Nomura's Bob Janjuah: QE2 Has Run It's Course, "Time to Fade Jackson Hole"':
Wile E. Coyote & the Roadrunner
Wile E. Coyote & the Roadrunner
I think he's early on the call.
The Fed's open market purchases of treasuries are scheduled to run through June and equity market participants are fully aware that they are playing a game of Chicken with each other. The problem the punters face is the miserable returns offered elsewhere, a half-point picked up in a Netflix scalp can equal the interest earned on T-bills in 100 days. So they stay at the market.

It is going to take one of those collective Wile E Coyote moments:

Wile E realizes there is nothing supporting him a nanosecond before gravity reasserts itself. We aren't at the mass realization stage yet. As I said yesterday, "When the music stops try to grab a chair, this is a dangerous little game we're all playing.". 
We all know it, we've been babbling about it since August.
Last month in "How Dysfunctional Is This Market? (SPY; XLF)":
Everyone knows this market is rigged. The general feeling is that when it tanks "I" will be sharp enough to recognize it....
Well, with the ADP jobs numbers this morning and the Moody's downgrade of Greece, described by the Wall Street Journal's Mark Gongloff:
...Eh, there’s no point in even being sarcastic about it any more. Moody’s has downgraded Greece today to Caa1 from B1, which is essentially downgrading a corpse from dead to really, truly dead....
The markets have been in pretty much straight-line decline since the open.
Wile E. may have just realized that General Motors has stuck their dealers with 574,000 cars that they've counted as "sales" and that Joe Biden isn't as smart as we thought. QE2 is ending and Jesus didn't return last month.
Alles ist kaput.

In September-November 2008 I was sleeping in the office at least a couple nights per week and the markets were moving 7 to 11% on the wildest days. The volatility index was setting new all time highs and it was exhilarating. Look at these point moves, the largest in the history of the DJIA:

Rank↓         Date↓     Close↓ Net Change↓  % Change↓
1 2008-10-13 9,387.61 +936.42 +11.08
2 2008-10-28 9,065.12 +889.35 +10.88
3 2008-11-13 8,835.25 +552.59 +6.

And on the downside:

1 2008-09-29 10,365.45 −777.68 −6.98
2 2008-10-15 8,577.91 −733.08 −7.87
4 2008-12-01 8,149.09 −679.95 −7.70
5 2008-10-09 8,579.19 −678.91 −7.33

Today I'm just tired