Random Thoughts: The No-Taper Rally Is Gone -- Now What?

By Todd Harrison  SEP 24, 2013 10:44 AM

Looking to the banks -- and gold -- for clues.


Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

Well I’m learning to fly, but I ain’t got wings; coming down is the hardest thing...
-- Tom Petty

It’s been a bipolar stroller on Wall Street; following last week’s “Oh No You Didt!” decision not to taper by the Federal Reserve, the knee-jerk rally to all-time highs quickly gave back all the gains and then some.  The question is begged: Was it a healthy “back and fill” or one of the more vicious head-fakes in recent memory?
In the A.D.D. immediate-gratification stock market, the next catalyst is always right around the corner and the next bogie is the specter of bipartisan bickering and a potential government shutdown. The last time the president and Congress crossed swords over the debt ceiling in 2011, the S&P (INDEXSP:.INX) fell 17% between July 22 (when talks fell apart) and August 8 (after the US credit rating was downgraded). 
Will history repeat or perhaps rhyme?  Time will tell, but it’s worth noting that much of the buying the last few weeks was short covering, which removes a forward layer of demand.  Indeed, this market is setting up for a pretty significant showdown into year-end, with performance anxiety-ridden fund managers on one side (ready to chase the tape higher) and late-to-the-party bulls (and their attendant pain tolerance) on the other.

Some Random Thoughts as we together find our way:

Twitter: @todd_harrison

Position in SPY.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

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