A Textbook Oversold Bounce

Equities start the day higher on a textbook oversold bounce. So last week I was reading this relatively humorous market recap by a potato shaped guy in the Midwest where he said “no way the market has a big move with 2 weeks left in the year”. Man, what an idiot that guy is. Wait. Actually, to be fair to myself, we’re only 3% off the all-time high so it might be a bit early to flog the back. Nevertheless, the market is really struggling to cope with this dramatic drop in Crude. It really, REALLY has no idea how to react. Frankly it’s not the drop in Crude that worries me, it’s the drop in credit. Credit is always the canary in the coal mine. If you were watching the credit markets in 2007-2008 you would’ve known something bad was about to happen. Now I know it’s not the same situation here, I’m not trying to say we are due for an implosion, what I’m trying to say is that the credit markets lead and they are leading lower. Can’t we just hit fast forward on 2014 and call it a day?  Who wants to have a serious market discussion on Dec 15? I want to write about how bad peppermint chocolate is and show you funny pictures of Elf on a Shelf. Now I gotta be all serious about $40 crude oil and the fact that market can’t find a bid. Sigh.

After the open it was nothing but down and to the right. Santa Claus rally? Nope, more like this. There were literally no bids in the market, all we got was cascade selling which extended our streak of horrible price action. You know what, at this point I can’t blame crude oil anymore. For days now the media and twitter have settled on “weak crude” as the impetus for all this market misery. Which is fine, a drop like we’ve seen over the past few weeks smothers us in uncertainty.  But you can’t go day after day blaming one event, one single solitary thing. Eventually the market becomes numb to it (remember Ebola or Cyprus banks?) and moves on.  This late year selling is a combination of a lot of things so let’s not be complacent about that. Crude, protecting profits, downward momentum, pricing in slower growth, it’s a bit of everything. Two M&A events to talk about, RVBD and PETM, both of which were acquired by PE.  Speaking of M&A, the Burger King / Tim Hortons deal was finalized. You know what ticker symbol they settled on for the new company? WHPR? DNTS? Nope, QSR. Freaking QSR!! What marketing genius came up with that one? Sigh. By lunch we sat on 1,995, down 0.3%.  Winners:  DO, ADS, NBR, ORCL, SPLS.  Losers: F, SBUX, REGN, VRTX, QEP, and ADBE.

The afternoon saw fresh lows as Crude nearly touched $54. We closed just off the lows, 1,989, down 0.6%, on another miserable day. So that puts us back under the 50day MAVG and a full 4% off the yearly highs. There are just 11 days left, one of which is a half day, so the old Mike would’ve said “come on, what could possibly happen near Christmas”. The new Mike is going to say “I have no idea, I never would’ve expected action like this at year end so I’m going to stop saying dumb stuff”. Seriously, how out of left field is this whole thing? Couldn’t we have at least waited for the figgy pudding before rioting over falling energy?  

Final Score:  Dow -58bps, S&P500 -64bps, Nasdaq -100bps, Rus2k -105bps.

News Highlights:

Tonight we’ll end with the best tennis rally I’ve ever seen.   Some sick, sick shots in here!


Have a good night.