This has been going on for a month now. Hours of power. Don't be fooled.
The market right now resembles a poker table, and short stacks/big stacks theory truly applies.
There are those who view the market's last hour 400 point surge as a bear/bull trap. There are those who look at it as smart money coming in. There are those who view it as rubbish. There are those who note volume bars and demand/supply charts and extrapolate Fibonacci theories as to where the market will end up. There are those around to cite cheap stocks and compelling value. There are those who track the last 100 years of the Dow Jones and swear this pattern resembles 1st April 1933, 330pm. Some might blame the way the moon has wax/waned. Some might blame the high tide in Costa Rica. Some might look at the Mayan calendar. Some will attribute it to fat fingers.
Plenty of reasons. Truth is, no one will ever know.
What caused the rally of 400 points in one hour? It's a confluence of events and emotions. Fresh shorters, sick of trying to bottom pick and newly converted to the dark side, reading or hearing of rumors of some sort of European wide bank recapitalisation would cover immediately. Long guys, who have been "dipping their toes" suddenly had a leap of faith and piled into the share market. Asian traders/fund managers who were up at 4am/6am in the morning, reading news as part of their daily routine launching buy orders on futures. Panic sellers who sold below 10600 (since it was the all governing support line) turning around and paying 10700/10800 for fear of missing out of a short term rally, since they already held all the way down. Maybe as Vlad said, someone tripped the wire and launched a basket of buy orders.
No one knows for sure.
Just remember one thing everyone - we're going lower. I don't care if it takes 1 year to get there, or we get there in 2 months. This is one fantastic big margin call. It doesn't end within 2 months. Trillions of dollars have been leveraged up to buy crappy assets. It's a long way to go.
For EVERY single reason you can think of, as to why the rally in the last hour happened, and even if they were ALL correct, in EVERY case, those that bought would be on offer 2% higher.
Which means, you're far better of waiting for the "rally" to peter out before going short again.
I repeat. We are going lower.
Turns out the rally lasted exactly 1 hour. Because since the SPX futures reopened, they have fallen away.
Shorters who drew the line in the sand at 1200 and started shorting with conviction, and holding on to their positions are so far in front that it is going to take a rally of huge proportions to even scare them. And if they are all going to cover at 1208 like I am, then they will be driving it all the way back up to 1400. Like I will.
You got 100 SPX points and 1000 Dow points to scare this latest batch of shorters. That's ALOT of buying. That's bull market buying.
Who's gonna lift it?
Retail investors? Not enough firepower.
Hedge Funds? They are busy shorting and worrying about liquidation and redemptions.
Long only Funds? Cash. USD 10 years.
Sovereign Funds? Read Temasek, Al-Talaweed and Emirates funds being torched in their investments in 08. You think they would make the same mistake twice in 5 years?
China? They got their own problems.
Japan? Busy with radiation and currency problems. And porn.
Buffet? Hedging his BoA and pro American bets by shorting all of Europe. And hitting on Becky Quick.
Soros? Attacking the Euro no doubt. And every other currency in the world from the rumors I hear.
Rodgers? Already short. And long farmland.
Tudor-Jones? Long equities, short futures. In other words, not a clue what's going on.
Pimco? "single digit returns for a long time" - translated it says "It's too hard, I'm gonnna buy 10 years and wait".
Merriwether? Going long. Again. No doubt blowing up. Again.
Governments? Busy handling inflation, currency and trade wars and Greece.
Vampire Squids? "We think there will be more volatility" REALLY????? Was that for free?
Of course I could be completely wrong, and this market might put on exact 1000 points and go to 1209 just to prove I'm an idiot, and then when I get sucked in to go long it will crash to 700 SPX.
I've waited 3 years to belt this market and its lunacy of printing endless reams of toilet paper that only Martians will find valuable.
I've given up trying to pick the swings, and resigned myself that the whole game of scalping is just one big cluster-poke fest in this environment. Stop raids, 400 point surges on RUMORS of a news article (seriously?), momentum changes in 2 minute ticks all makes for good viewing, but crappy participation.
Just draw the line in the sand, take a view, limit your losses and watch the house of cards fall.
When this is finally done I want to own my own Greek island. Or Italian. Or Spanish. Whichever government has a police force that has been paid in the last month will do me.
(20min delay)