Everyone Keeps Hoping The Bottom Is In

Equities start the day higher because everyone keeps hoping the bottom is in. Then 2pm shows up and we get pounded like so much chicken breast. No news overnight, thank God, but bond yields did make fresh 2014 lows. 2.2% on the 10yr this morning..…just blows my mind. At the start of the year 10s touched 3% and the entire investing world thought the bond trade was over. Over I say. But if you had bought them in January you were NEVER down on your trade, not once. Not only that, you are crushing equity investor returns. Are we all going to get another shot at re-financing? If it keeps up like this we certainly will.   Back in equity land a full 60% of Rus2k stocks are more than 20% from their highs. Isn’t that a full blown correction? Sure feels like it. Can we stop talking about how the “market is due for a pullback” now?  We’ve had it, are having it, it happened, so let’s find something new to talk about like “we’re due for a rally!”  I like the sound of that better. The problem is we aren’t going to rally until Ebola headlines settle down and we get some decent economic data. There’s been a lack of good ole fashioned American macro data lately and its killing us. Who do I have to bribe around here to see an ISM? Don’t we have like 87 of these manufacturing surveys, can’t we put one out here?

After the open it was all about that buyin…’bout that buyin….no sellin (I’ve been waiting to use that for 8 weeks now).  A rip roaring bounce because there was less bad news. No planes being quarantined, Europe not falling apart, no Fed speakers, nothing that would let the Bears press their case. Plus, you know what, stocks bounce after they’ve been kicked like this. Banks did well after JPM and C reported numbers. That being said, I’ll leave bank earnings to smarter people because whoa nelly can they be filled with arcane stuff. What else….DPZ was a big winner after this hit the internet. Other winners were DAL, TXT, DLPH, DO, LUV, and HAR  (btw, all of those have been crushed recently). LAKE continues to wing around (down 26%) because no one has any idea how to price Hazmat suits right now. Look at the 4 day move in this thing for crying out loud. Other Losers were TYC, GILD, ADSK, AET, QEP, and NBR. Crude was also a big loser after it broke $82. If I told you Crude Oil was below $82, a full 22% from its highs, would you have said “sell airline stocks” because that’s what’s happening (for the obvious reason). Who prepped for a trade like this? What airline investor said to themselves “boy, I really want Crude oil to go down so airlines are more profitable and I make a ton of money but I really need to hedge my global pandemic risk. Maybe I’ll buy LAKE.” By lunch we sat on 1,889, up 0.8%.

The final hour saw us head inexorably lower and only a last second save kept us from another face down close. 1,877, up very slightly. You know what the problem is right now? Buyers are higher. But Mike, how can buyers be higher, why wouldn’t they just buy right now. Because we have a falling knife, and anyone who lived thru 2008-2011 refuses to catch it. So they’d rather miss a few % and buy when things feel a bit more stable which is exactly how they SHOULD act. Frankly the story today was the move in Crude and Fixed Income. If you looked at the moves in the Treasury Curve you might’ve thought the Fed cut rates. Someone point me to the best fixed income recap….one that’s funny and doesn’t talk about convexity and spreads and zzzzzzzz  

Final Score:  Dow -4bps, S&P500 +16bps, Nasdaq +6bps, Rus2k +117bps.  

News Highlights:

We’ll end tonight with a human pinwheel. I mean there’s no way this is real right? Has to be fake?


Have a good night.