Rumor to Rally

by Larry Levin


Since there isn't much (new) one can say about today's rally - I won't.

The market gapped open lower on bad news then turned higher and ran out the short sellers. That's how the game is played on Wall Street and I could simply leave it at that, but I'll go a little deeper. Our Notes From The Pit support section had market profile support near 1055.00, so the reversal wasn't that surprising when the early selling failed miserably.

The absolutely horrible housing starts data helped drive the market down to our support level, and the news was so bad that an early bout of selling could have really crushed the S&P500 this morning. Support held - then the shorts began to cover slowly but surely.

Oh, but it didn't end there. Much like the daily announcements of the false Greek bailout rumors a few months ago, the market exploded in the afternoon on a home grown rumor. This time, the rumor was making the rounds on Fraud Street trading desks that Zimbabwe-Ben Bernanke would stop paying interest on reserves held at the Fed. If that happened, the thought went, the banksters would lend more and then REALLY bankrupt individuals in the US. Oh wait, that was supposed to read "would really lend more and boost the economy." Hmm, I believe the former is more accurate.

Dan Greenhaus said the following to Bloomberg...“Some people are speculating about the Fed announcing it tomorrow when Bernanke testifies,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York. “If you suspend paying that money, you provide less of an incentive for the banks to keep the money with the Fed and encourage them to do something else with it. It will spur on the economy and could turn the market around.”

Of course, this rumor was quickly refuted - just like the 10th & 11th & 12th false Greek bailout rumor - but it didn't matter. Just like when the pump-monkeys ran up equities after the Greek lies and refused to adjust to said falsehood, today's gains held.

Who needs honest-to-goodness bullish fundamental news when the financial pimps on Fraud Street can turn a 1.3% early loss into a 1.1% gain at the close?

Oh yeah, one more thing: today's volume was a joke yet again given the massive reversal.



Previous Day's Trading Room Results:

Trade Date: 7/20/10

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


1) VA buy @ 11:00am at 1061.25 = +1.50 (1 lot)

2) Algorithm positions (25)

3) “Reading the Tape” positions (36) combined Secret’s, Algo, & “Reading the Tape” total +16.50



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