Once Again - Rumors

by Larry Levin

Today's market gapped open lower this morning and caught an early bid, which is not abnormal. Buying below the prior day's perceived value area is shrewd, if you believe the lower open is a bargain. This often leads to an early rally that fizzles out near the Globex high, or the prior day's low, which ever comes first. What happens far less often, however, is an excruciatingly slow but persistent one-way rally. The latter happened this morning.

If you traded today you were surely wondering what on earth was driving the buying. After all, there was no news - no economic data - the entire day. Never fear, the rumor mill is here!

Our old friend from CNBC, Charlie Gasparino, is now at Fox Business News (FBN) and is still "reporting" the same half & non-truths. Today's were rumors of Shitibank shaking off the government overlord, presumably because it is healthy enough to be on its own (bulls*it...caugh...bulls*it) and some new anti-shorting regulations.

From FBN...

The U.S. government, looking to unwind its investment in the banking system following the near-collapse of the financial system in 2008, is discussing plans to sell its massive stake in Citigroup, possibly as early as this spring, FOX Business has learned.

Previously, federal officials, including Herbert Allison, who heads the Troubled Asset Relief Program, have said that they plan to unload the government's 27% stake in Citi over the next year. But FBN has learned that in private meetings with Wall Street investment bankers, the federal government is discussing the possibility of doing it sometime over the next three months.

Later in the morning high profile hedge funds were reporting (spreading rumors) that the government was ready to implement "new stringent short-selling rules (which) is causing a squeeze in heavily shorted names."

After the close we learn this "There is no truth to the rumor that we are considering restricting the short-selling of stocks in which the government has a stake," John Nester, Securities and Exchange Commission.

But why would that matter? Knowing a rumor is complete BS makes no difference whatever once the rally is known to be false. Why give up ground gained? Who needs funnymentals when one has a rumor mill? Even after the SEC statement, AIG is holding onto over 10% of its ridiculous advance.

During the day Shitibank exploded over 8%. In addition to Shitibank's BM, AIG, FNM, and FRE exploded. Ah yes, it was a true rumor filled advance.

When a false rumor hammers the market the government correctly sniffs out and prosecutes the culprits...as long as the trail doesn't lead to GS or JPM. But when false rumors repeatedly ramp the market higher; why doesn't the government sniff out its origins?

I think we know the answer - don't we?



Previous Day's Trading Room Results:

Trade Date: 3/9/10

E-Mini S&P Trades*
(before fees and commissions):


1) B/away sell @ 8:32am at 1134.00 = -1.00 (1 lot)

2) Sadly, EIGHT winning trades went unfilled today.

3) Algorithm positions (0)

4) "Reading the Tape" positions (0) ...combined Secret's, Algo, & "Reading the Tape" total...-1.00



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