We’ll treat Santa rallies with caution, if not to say skepticism, as a result of Tuesday’s take-no-prisoners onslaught. Mainly, it’ll be a matter of keeping the word “DISTRIBUTION!!!” in mind whenever bulls seem emboldened. That goes for AAPL as well, my one-size-fits-all bellwether. The stock had switched on the charm Monday, all but shouting “Buy me!” from the rooftop as the session ended. This was before AAPL tripped an outright ‘mechanical’ buy signal midway into Tuesday’s session — one that met our criteria for jumping on that type of trade. Lo, the stock thwacked our bid, then continued relentlessly lower for the remainder of the day. This eventually stopped out the trade, but the thing to notice was that AAPL barely bounced after the last bull had been cast off. It does not bode well for the short-term.
Nomura bank’s man-in-the-trenches attributed the selloff to more or less technical factors while noting that his employer’s ‘CTA Trend Model’ — here’s a mouthful of jargon — “is again deleveraging massive notional in long US Equities expressions across SPX, RTY and NDX live.” Phew! For a moment there, we’d though it was just run-of-the-mill fear that brought sellers out in droves. He also noted that the selling occurred in the context of a well entrenched global shift by investors out of stocks and credit and into government bonds — all due, apparently, to a sharp turn in the economic cycle. Now they tell us! Think what it could have meant to us pishers if we’d known a day earlier what was on the tiny, fevered brains of algo traders and their Olympian Masters as the week began. The Masters’ unaccustomed lust for Treasury paper has reversed the upward spiral in rates, a development that some will see as beneficial. But a fat lot of good it will do us if the U.S. economy is already headed into a recession that dulls housing appetites, even with mortgages 75 to 100 basis points lower.