Had you left the market right at the opening bell and returned at the close, the market was flat for the session. For the rest of us, stocks crumbled throughout the trading day and looked espcially weak before a massive buying frenzy lifted stocks off their lows.
And for the second straight day, the $SPY closed exactly where it began. For the second straight day a massive late day ramp was the reason prices ended the day right where they started. The boomerang algo. These have become all too common in 2015 to be put off as coincidence.
More importantly: Where are we headed into the fall?
First let's look at some of the individual action. While the $SPY may have closed exactly where it opened, a host of names fell and did not get back up.
One of those names was $FB.
$FB was over $96 early yesterday, late today.. before the massive late day spike to the upside, was trading under $92. The ambitious buyers of yesterday at the highs were sitting on over 4% losses this afternoon. Amid the rabid buying frenzy yesterday I was buying PUTs, which ended up working out rather nicely. Although it took a while to marinate.
$GPRO, on the flip side saw early weakness turn into tremendous stength as it rallied near 4%. $FCX moved from big losses to a nice gain. I noted the strength early on, amid the wrecked mining equipment.
What's become more and more obvious are the rips are getting sold. We get these furious counter spikes to the upside, but they are swiftly reversed. The late day action yesterday looked rather ominous for the bears yesterday evening. But overnight stock futures fell off a cliff.
Tonight we are in for some more data from China. Is this another reason for stocks to sell-off. Some think the China weakness story is overdone. The FED, however, seemed more concerned than most about China. Was today's sell-off in anticipation of more China carnage?
One thing is for sure. No one quite knows exactly why stocks are selling off. Is it uncertainty about FED liftoff? Is it China? Is it global growth concerns. Is it something else we don't know about? Is it looming defaults in the energy sector? The bottom line right now is that the rips aren't lasting very long, and higher prices have been nothing but a better price for investors to sell at.
In all of my recaps since the August market crash I have stated that I thought prices would come back to the crash lows. We saw it during the flash crash and it took a few weeks back then for prices to revisit and than plunge under the flash crash lows. Stocks ultimately recovered to soar to new record highs this year. I'm not ruling out record highs in the future. But I do think the short to medium term picture remains decidedly bearish until we get to the lows from August. I think the market is saying that as well.
The FED FINGER, covered a lot of what I think in the short to medium term. I think the market is starting to realize that ZIRP is only going to goose asset prices so long until the risk associated with it starts to rear its ugly head. That is the stage we are at now. The proverbial rock and a hard place. These last minute market spikes are nothing more than relief rallies and better prices to buy PUTs go short at.
We don't have the clear V bottom of years past. The more charts I look at the more bearish I get about this market. It's not easy going short a market that no central bank in the world wants to go down. But someone is selling. Assuming the sellers don't get rounded up and hung in public, I think this selling will continue and I am going to get more and more aggressive on any relief rally or spike.
As summer turns to my favorite season of the year, its time for stocks to Fall.