On the heels of another down day in China’s stock market, the Dow and and the dollar are bucking the trend but Europe is sagging, today one of the greats in the business sent King World News a fantastic piece discussing the global chaos and what to look for today.
August 26 (King World News) – Art Cashin starts off today’s piece with a play-by-play of the chaos from yesterday: “Many TV pundits spoke of the strength and vigor of the upside reversal. That proposition was repeated so often that I felt compelled to send a note to friends pointing out some flaws in that thesis. This is what I wrote:
Despite this huge bounce, the Dow and S&P have failed to reached their 1:00 intra-day highs on Monday of 16,459 and 1965. Today’s highs are 16,263 and 1940. Keep an eye on crude, which is off the day’s highs and faltering a bit.
I would then repeat those concerns with Bob Pisani on CNBC.com and later with Carl Quintanilla on Squawk Alley.
Stocks slipped back off their intraday highs and then churned laterally as they awaited a new signal. I noted that in a midday follow-up:
Stocks spinning wheels just below the day’s high as they continue to monitor WTI.
Volume nowhere near where we were at this time yesterday. At noon, the run rate projects to 920 million to 1 billion shares versus yesterday’s 1.66 billion.
(A crushing final hour selloff would swell the final NYSE volume to 1.26 billion shares. Again heightened volume on the sell side.)
Shortly after 1:00, prices began to ease further, slipping below its early morning lows. The reasoning was quite vague as I alluded to in this follow-up:
Stocks pull back sharply as traders claim it is a reaction to a rumor out of China. No specifics as to what the rumor was supposed to be about.
The lack of immediate specificity was probably due to the fact that there were several different rumors relating to China circulating at the same time.
The first was that China was blaming the recent market volatility on the Fed’s comments that a rate hike might be in the immediate future.
A second was that banking sources (unnamed, of course) had said that all the PBOC easing moves were part of a complicated strategy to devaluate the Renminbi more extensively.
There was even a vague rumor about troop movements around Beijing. That rumor never really caught fire but we are told it was actually mentioned on TV.
Then began the setup for the final hour selloff. Some of the FoF exchanged emails on the market on close indications, so let’s review those.
At about 2:45, they noted that the close looked 75% sell orders with $500 million to sell on balance. Not highly unusual.
By 3:06, they noted that things looked over 80% to sell and had just over a billion dollars to sell on balance. That was spooky enough that prices started to slip in anticipation.
By 3:25, there were indications of 85% sell with over $1.8 billion on balance for sale. By now, the market had shifted into meltdown mode.
By 3:35, we had grown to 90% sell with a very hefty $2.5 billion on balance for sale. The meltdown was accelerating as volume swelled.
Ten minutes later we were up to a likely $3 billion for sale on balance and the market was in near rout. By 3:48, it was up to $3.5 billion and, as I told Bob Pisani on air at 3:55, by that time you couldn’t find a buy order on the floor with a flashlight and a Geiger counter. An ugly close to an ineffective rebound attempt.
Overnight And Overseas – Shanghai closed -1.37% after swinging up and down 4%. This time Hong Kong closed down too. Tokyo was up as were the other Asian Tigers.
Europe was lower mostly in “catch-up” to the late selloff in the U.S. but it cut its loss in half. The two year yield moves up in front of Jackson Hole, but Bunds trade better. Euro is noticeably softer and may take out Tuesday’s lows. Keep an eye on that. ECB expresses concern about falling commodity prices. (Do you think Yellen is listening?)
Gold and metals softer with crude virtually unchanged. U.S. futures look to repeat Tuesday morning.
Consensus – Very oversold with short covering rebound due. Watch Tuesday’s highs (Dow 16312 and S&P 1948). Also, volume will be important. Think crude will remain a key influence on stocks. Stay wary, alert and very, very nimble.” ***ALSO JUST RELEASED: As Fear Escalates Around The World, A Note On Gold And The Great Decline In Living Standards CLICK HERE.
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