For those looking for anything positive from today’s price action are very likely going to have to wait just a bit more………the truth is that they were doomed to fail with a 2% gap higher on the opening that felt like it was on fumes from the get go….don’t want to spend too much time on this, but the fact that BAC‘s opening tick of the day was the high, and then spent the rest of the day moving towards it’s inevitable closing tick which was the low for the day, and a new 2 year closing low, was about as bearish as you can get. The Reuters story citing GS CEO Lloyd Blankfein’s hiring of a high profile criminal defense attorney (read here) hitting the tape at 3:46pm was the final nail in the coffin for a sector that many investors/market participants are watch closely for any signs of stabilization……I am sticking to my guns that the only way this sector, and in my opinion the market is going to bottom is with a fairly dramatic crescendo in this space…..and I say this with no excitement as it will be most uncomfortable for anyone who owns equities.
Some names that I highlighted this morning NFLX, AMZN, LULU, CRM, WYNN and CMG acted fairly poorly even while the market was still up…..this shows a broadening out of the selling to some of the most beloved stories in the bull run that started last September…..in the near term in my opinion this is fairly bearish as it shows that investors are now selling their winners regardless whether the market is down or up……
The Chart below of the SPX shows the now almost infamous pattern of the “death cross” where the 50 day moving average crosses the 200 day moving average to the downside and is supposed to signal further weakness. (read here) I have no clue if this is reliable or not, but the chart looks and acts like crap and I am hard pressed to see any real positive action that leads me to believe that we are going to be seeing smoother sailing ahead….
I guess the only real positive I see is how oversold we are in such a short period of time and how unbelievably bad the sentiment has gotten in such a short period of time…..Things went from a little negativity because of how dysfunctional Washington was around the debt ceiling debate to how unpatriotic it was of S&P to downgrade our debt to how unbelievably screwed global growth is, how the Euro-zone is about to splinter and piece by piece fall into the Atlantic and the Mediterranean, how the our economy is most certainly entering it’s second recession in 3 years etc etc etc…… and I am sure I am forgetting a few things.
ALL OF THE MANIC BEHAVIOR BY OUR POLICY MAKERS, BROKERS, ECONOMISTS AND MARKET PARTICIPANTS IS LIKELY TO SEE A CRESCENDO THAT COULD OCCUR IN OR AROUND BERNANKE’S SPEECH ON FRIDAY. SOMETHING HAS TO GIVE HERE AND I SUSPECT IT STARTS WITH A SCARY MOVE LOWER TO NEW LOWS AND THEN SOME FORM OF REVERSAL THAT WILL BE ON HUGE VOLUME.
Here are a few little things that I expect could happen in a mini-panic:
-The SPX will go t0 1050-1025, BAC will have a 5 handle, C will flirt with being a teenager, AAPL will likely make a matched low from June, LNKD could go back to its ipo price of $45, COH and TIF could roundtrip their dramatic entire years performance, HPQ could call off their $10b deal for Autonomy , Crude goes to $70, 10 year treasury yields see 2% as a new upper end of their range, oh and GLD is at $200.
Not to be overly dramatic, but we have to see some funky stuff before we are out of the woods, and when I see some of the above I will be that much closer to sticking my toe in the water from the long side….And make no mistake about it, if this is caused by the disappointment about Bernanke’s speech then the chairmen will eventually have to do his little “Helicopter Ben routine” which will cause shorts to cover, even if only short-lived.