Bulls Go All Russell Crowe Here

Equities start the day lower as bulls go all Russell Crowe here. I’ll tell you what, I’m still wiped from Wednesdays move. I sat in the parking lot staring at my speedometer yesterday because I didn’t want to muster the energy to drive. I haven’t seen markets like that since Greek debt made the world tremble. To be honest, I’m not even sure the story was about equities, it was probably fixed income. Some bond short got taken out of business yesterday, the move in 10yr yields was an 8 std deviation event, something that happens once in thousand year...ok lemme stop right there. You know what, insane stuff happens in markets. Stocks, bonds, options, commodities, all will do things you can never plan for. Things that no rational human would expect. Standard deviation events are just fancy ways of saying “wow, this puppy did something crazy so now I need to sound smart about it”. You just can’t prepare for everything, especially in the equity world.  But you know what? Days like yesterday are why equities have a risk premium over bonds. You can’t have that without volatility/selloffs so learn to embrace the carnage. What really bums me out is the velocity of these moves. It took 262 days for the market to gain 9% and only 19 days for it to be wiped out.  So where do we go from here? That’s the real question. Unfortunately I don’t think we race back to the highs, we’re gonna need to mow this grass for a while before it regrows.  Europe is going to need someone at the ECB to say something positive and we’re gonna need a solid earnings calendar and juicy macro data to get going again.  And that’s not even addressing sentiment which really needs to get ugly. The damage is done people, bears are going to claim victory over the “stock market bubble”. I saw a great quote on Twitter that said “yesterday there was blood in the streets, now we have to wait for the bodies to show up”. So true.

After the open we buckled up for another wild ride. But you know what? I think everyone wore themselves out yesterday because it felt relatively calm. We spent most of the day rallying after Fed President Bullard said “yea, if we need to keep this QE thing going we can talk about that”. I said this in a previous recap, and about a million times in 2011, but in these kind of headline driven markets all you need is one central banker or finance minister to say one random comment and things can turn rapidly. Which is what makes this kind of price action so incredibly frustrating, especially for people in our industry. Analyst work takes a back seat to macro, PMs get whipped around, traders chase VWAP all over the place, lunch delivery business soars, and headline writers can be both relevant and irrelevant in a 30 min span. The biggest loser was NFLX, which dropped 19% after godawful earnings guidance. If you are a high multiple stock in October 2014 you better not guide lower or your stock is gonna look like a Saw movie. Other losers were SWN, EBAY, GWW, and FITB.   Winners were almost all energy stocks as Crude oil finally caught a small bid. CHK, QEP, DNR, NFX, and RRC to name a few. By lunch we had erased a 1.2% overnight decline and sat on 1,867 up 0.25%. Did I mention AAPL introduced new iPads today?  No?  Well they did, and they get thinner every year. Which is the opposite of me. Hey, at what point is AAPL gonnna stack 5 iPads together and sell them to Gillette as a new type of razor? I should work for Bain. Moving on.

The final hour brought absolutely no stock market movement. In fact the S&P went nowhere from 1130am to the close. Absolutely freaking nowhere. Which is a huge bummer right? It’s like we were fed oatmeal after eating at one of those super fancy one name restaurants in NY where you drink $15 water. 

As long as we hold yesterday’s lows I think the market can start to repair itself. Make no mistake though, bears will try to push it thru there. We’re gonna see some wicked selling again soon, today was nothing more than a rest day. Be prepared for it because you know it’s coming. We just need to channel our inner Gladiator (or is it Braveheart?) and HOOOLLDDD. 

Final Score:  Dow -15bps, S&P500 flat, Nasdaq -55bps, Rus2k +125bps.

News Highlights:

My final link tonight features the most disappointing ending to a video since Jar Jar binks won that battle by acting like a complete moron.  


Have a good night.