Market Cheat Sheet: Responding to new data

This is circulating via email around trading desks:


Cheat sheet: reacting to data and market releases

weak data =  Fed ease, stocks

consensus data =  lower volatility,
stocks rally

strong data =  economy
strengthening, stocks rally

bank loses $4bln = bad news out of
the way, stocks rally

oil spikes =  great for energy
companies, stocks rally

oil drops =  great for the consumer,
stocks rally

dollar plunges =  great for
multinationals, stocks rally

dollar spikes =  lowers inflation,
stocks rally

inflation spikes =  will inflate all
assets, stocks rally

inflation drops =  improves earnings
quality, stocks rally


very funny!

(Thanks Peter!)

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What's been said:

Discussions found on the web:
  1. Gary commented on Oct 12

    The majority of the big money is buying as shown by the commitment of traders report = stocks rally. That’s all you need to know really. When the big boys start selling then it will be time to cash in the chips. No selling yet. The report comes out today. I’ll post if anything changes over at the SMT.

  2. Jim Bergsten commented on Oct 12

    Bergsten (me) not in market = stocks rally.

    Keep on gloating, and I’ll re-enter the market, and THEN YOU’LL SEE!!

  3. Jim M commented on Oct 12

    Barry, I think your previous post said it all: Stocks fall = Fed shovels out more liquidity, stocks rally.

  4. CBam commented on Oct 12

    And we’re seeing the “everything points up” phenomenon today.

    Retail numbers say the consumer is spending more. Equities up!

    A closer look at the number indicates of the change was consumers spending more money to get the same amount of food and gasoline. Sounds like inflation. But food and gasoline don’t count as inflation. Equities up!

  5. Justin commented on Oct 12

    The Big Boys must have there heads up their ?????, if their buying. Or perhaps they know something I don’t? Tech has been a joke, who the hell is feeding that monster? And is there a possibility of collusion amongst the media outlets as to there timing of economic releases and their slantings? Everything just seems so orchestrated

  6. Woodshedder commented on Oct 12

    Justin, don’t over-analyze. Its just a bull market.

    CBam, the last employment situation showed wages rising. So the food and gasoline may be more expensive, but as long as wages are rising, there is not such a grand disconnect.

  7. Turbo commented on Oct 12

    Healthy bull markets have a healthy amount of skepticism, are an up 3 days, down 2 days a week proposition, and don’t track higher when quarterly earnings turn negative. None of the above applies right now. Right now the marginal buyer is a price insensitive second tier central bank or monetary authority diversifying into equities, joined by record corporate buyback cash sitting on the bid. Earnings or economy driven – LOL. It may be turn out to be the ultimate stupid money trade, but it has a lot of firepower.

  8. Philippe commented on Oct 12

    Governor Randall S. Kroszner
    At the Federal Reserve Bank of San Francisco, Conference on the Asian Financial Crisis Revisited, San Francisco, California
    (via videoconference)
    September 6, 2007

    Would this comment from Mr Krosner (Fed board member) fit the Big picture
    “As a final introductory thought, I want to note that my remarks today on banking crises relate to research conducted on a range of countries, many of them emerging-market countries, and are not a commentary on current financial conditions or on the health of the U.S. banking system, which, as I noted above, is quite good”

  9. michael schumacher commented on Oct 12

    “just a bull market”

    Over inflated and needing yet another fix of cheap money so that it can continue to allow the brokers to pull in those 2/20 fee’s

    Yes it’s “just a normal bull market”

    Needed a good laugh…….

    There is nothing “normal” about it at all..


  10. s0mebody commented on Oct 12

    Ummm, why is this funny? It looks like it’s true.

  11. W.Edwards commented on Oct 12

    I’m somewhat amazed that since the core PPI was tame, all was good, even though the headline rate was very hot and remains consistently above the core rate.

    The rational thought would be to say:

    1) if producers can push through the PPI headline increase to prices, the core rate will also be under pressure in the future forcing a more hawkish tone from the Fed, or

    2) producers eat most/all of the cost of the PPI increase, resulting in lower future corporate profits.

    Either way, you would think that valuations should be adjusted lower, not higher.

  12. Justin commented on Oct 12

    MS, so if it isn’t really a bull market, what sort of news, data, will it take to trump it?

    Woodshedder, thanks for the admonition; I agree but it is frustrating for us free-thinkers…wish I was more of a follow-the-leader type. (no I don’t)

  13. Global Savings Slut commented on Oct 12

    I smell fizzle going into the close. I don’t think a lot of people want to stay waaaay long going into next week. It looks like the internals are already weakening.

  14. michael schumacher commented on Oct 12

    You know as well as I do why the market is up here. It is’nt fundamental, technical or any other “accepted” explanation.

    You recall there was a story floating around about the Chinese now having about $200 billion to “invest”.

    Low and behold we are two weeks out from that “story” and it does’nt garner a mention anywhere now. Put that into context of “record highs” on crap volume (daily) and narrow breadth.

    In the immortal words of Fred G. SanFord ( and the G stands for Goldman Sachs )

    “I’ll give you five of these across the chops”

    What he did’nt know was that those “five across the chops” was spelling out C-H-I-N-A.


  15. Justin commented on Oct 12

    Ya’all have a good one…I’m off to have a few “Miller High Life’s,” put this stupid week behind me…cheers! lol I’m buying!

  16. tucker commented on Oct 12


    Me too. I got out end of July. Seemed like a great idea by mid-August. I have stayed out thinking, “just irrational behavior – when the data gets analyzed equities will fall”. Now I’ve missed a great two-months and can’t figure out WTF is going on.


  17. Woodshedder commented on Oct 12

    Justin, Michael, et. al

    My comment about it being just a bull market is appropriate. I did not say that it was rational, fundamental, or whatever. The fact of the matter is that it is a bull market. Accepting that fact means that one will typically behave in a certain way during such a market. Again, that doesn’t mean the behavior will be rational, or based on any fundamental basis.

    Again, there is a disconnect here between traders and economists. Traders know not to fight the tape. Economists say the tape is wrong. Both are correct, but it is a lot easier to make money when not fighting the tape.

    Does it matter if it is the Chinese who are buying? I’ve said before and I’ll say it again, if people are so sure they have it all figured out (the chinese are buying, the fed is massaging numbers, etc) then go all in, because as BR’s post shows, the market will keep going up forever.

  18. Groty commented on Oct 12

    Think the $1 billion writeoff at CTX was impressive? How about a company that reports NEGATIVE net new orders?

    A negative book to bill is equally as impressive as a $1 billion writeoff, no?

    Net new orders at CHCI were negative 54 for the September quarter. (See the last table)

  19. peter from oz commented on Oct 12

    if the big boys are doing the buying who’s doing the selling?
    for that matter who was doing the selling yesterday afternoon?
    do the big boys do something else on thursday afternoon’s in NY?
    which big boy posts the big futures contracts
    each morning?
    do the big boys have a substitution situation like the s&p?
    if a big boy makes the cover of business week is it then all over?
    rgds pcm

  20. michael schumacher commented on Oct 12


    I can accept that it is a bull market…..for no other reason than it IS.

    That, however, does’nt mean I am supposed to suspend any disbelief and stop asking questions when the market continues to celebrate higher (overall) costs in just about everything we consume. Oh and those retail numbers today??? I suppose paying more for less is the way to go if you are the seller…however not many of us are on that side of the deal.

    China is fucking us and we can’t or won’t acknowledge it. They own us…….
    but as long as our precious corporations can continue to post some profit (because by the looks of it earnings will continue to suck)and announce share buybacks in order to soften the blow of poor organic growth then we are all led to believe that it’s all ok.

    Ok for whom????

    We no longer have a free market when cycles are not allowed to occur. That is what has gone on over the last two years. heavily assisted (via the Fed and Treasurey) brokerages who can count on the Fed playing market maker for them if there is so much of a hint that the bonus’ are in jeopardy is what our market has become. And who do we thank for providing the capital for that grandiose exercise??….China.

    We have now crossed into the United States of Goldman Sachs……go look at where they have almost HALF of there assets stored….

    And we, as a people, just continue to allow this to happen…..


  21. peter from oz commented on Oct 12

    BTW which big boy has a wife who’s fat and has a great singing voice?
    rgds pcm

  22. peter from oz commented on Oct 12

    finally on the big boys
    to misquote hemingway on fitzgerald
    the big boys are just like you and I (they don’t know either) they just have more money (for now)
    rgds pcm

  23. Eddie commented on Oct 12

    How about:

    US still a great country = stocks go up

  24. Woodshedder commented on Oct 12

    MS- I think the cycles will happen. Its just going to be worse than it would have been otherwise.

  25. michael schumacher commented on Oct 12


    The markets have not had anything resembling a normal cycle, ala a meaningful pullback, in how long???? Says enough just with that..

    and I too realize that it eventually will have it because the market is bigger than any one thing or entity that attempts to control it……..however never has it had as much assistance and overt mis-information (thank you commerce dept.!!) thrown at it. And yet it still goes up….funny thing though…..IF that SPX bid EVER gets removed (it never does) we might get a pullback, but I would’nt count on that bid being removed until about the end of next summer…..nudge,nudge,wink,wink…..LOL

    Add that the Fed is now acting just like another hedge fund and that it’s trying to “forestall” a recession…..forestall it to when?? November 8th, 2008?—LOL

    I hate to say this but if the dots are ever connected to this administration (with all the overt conflicts of interest that are allowed to continue)it would make Watergate look like a church picnic. How long did Cheney get to keep his stock before he was told to “sell” it??? If it was Clinton he would have been shot and made an example of-just like Martha.


    That was for You RT!!!!

  26. The Financial Philosopher commented on Oct 12

    I would add this one:

    Stocks Go Up = Stocks Go Up

    Regarding the string of comments, I’ll quote Jesse Livermore: “There is only one side to the stock market; and it is not the bull side or the bear side, but the right side.”

    The “right side” should only determined by variables that are controllable — investment selection, asset allocation, and savings rate. Those variables are founded on the individual’s (or entity’s) investment objective, risk tolerance, and risk capacity. Uncontrollable variables, such as market movements, should not be a focus; therefore, a “bull” or “bear” position is purely speculation and not prudent. Both sides can be argued effectively at any given point because anyone can argue over some thing or some event that has not occurred…

    Most (not all) of those individuals reading this, however, tend to disagree with common sense…

  27. Les H commented on Oct 12

    The rational thought would be to say:

    1) if producers can push through the PPI headline increase to prices, the core rate will also be under pressure in the future forcing a more hawkish tone from the Fed, or

    2) producers eat most/all of the cost of the PPI increase, resulting in lower future corporate profits.
    BLS doesn’t just exclude crude oil prices from the core producer price index. Don’t they also subtract the change in the price of oil in products that have crude oil as inputs? It wouldn’t surprise me if they’ve extended this methodology to all finished goods and the raw materials that go into their production.

  28. Suge Knight commented on Oct 12

    You guys complain too much, so what if you’re bearish about the market? The goal is to make money (as a bull or a bear). What’s the big deal? Just buy a few stocks, geez, all this time complaining about why the market is going up, worry about that later, ride the wave, unbelievable. Keep saying that the market will tank, eventually you’ll get it right.

  29. Winston Munn commented on Oct 12

    Michael Schumacher,

    If you are looking for shady dealings and hidden injections, here lies the real liquidity injection and the secret coded password ring to the elite’s inner sanctum:

    “(The Fed is handing out) exceptions to its regulation 23A, which normally mandates 10% reserves for such conduit entities. The exceptions “temporarily” suspend these reserve requirements. They are open-ended.”

    I bet no more than a handful of folks know about or understand the significance of this little news tidbit. At least 6 big banks I know of have been granted this exemption.

    Let me rephrase something I’ve said before – the biggest tool the Federal Reserve has at its disposal to adjust monetary supply is reserve requirements.

    Here is what is happening. Some of the biggest banks, Citigroup, Lehman, Duetche Bank, ect., have been granted exemptions from the 10% reserve rule for conduits!

    What does that do? First, these conduits are off-balance, so the poor investing world has no clue how much money is in the conduit. Let’s guess $50B, just to use a number. Before, the banks had to hold $5B in reserves, or leverage of 10-1 for the conduit. Let’s say the Fed cut that from 10% to 1%. Look what happens.

    First, losses in conduits are not forced sales, as reserve requirements have been lowered, thus the conduits can be held longer without coming back onto the balance sheets.

    Second, the extra reserve from changing the 10% rule to a 1% rule just created $4.5B in excess reserves, which can then be fractionally reserved to create $45B in new money.

    So there you have it – by waiving this 10% rule the Fed has not only granted these banks a cushion against their conduits, but have also surrepticiously added money to the system, and because it is done with off-balance sheet conduit reserve, we, the investors, have no idea how much new money this created.

    Now there is an agenda worthy of some scorn.

  30. wunsacon commented on Oct 12

    Thank you, Winston! How very interesting. How did you discover this information?

  31. Karl commented on Oct 13

    Yep on the 23A letters.

    Now here’s the ugly part. Those exemptions bear on “Regulation W” which is there to prevent systemic failures in the banking system.

    Its part of the “safety system” put in place after the Depression to prevent an affiliate from sinking a bank.

    Guess what – the safeties on the nuclear weapons have been removed.

    I wrote about this back when it happened originally. Its extremely serious, and not for the reason you think – if those conduits blow up now, we have a full-blown banking crisis and it WILL go systemic.

    By the way, Congress has the authority under the Constitution to regulate this shit.

  32. Winston Munn commented on Oct 13


    Good stuff.

    Another reality that is presently held in conscious misperception is that the Fed can contol monetary policy with the Fed Funds rate, when, in fact, securization has effectively eliminated reserve requirements.

    The misperception that the Fed can control monetary policy is flawed, as banks can first lend against reserve requirements but then sell those loans in a securitization process thus freeing reserves – it’s really only one step removed from zero reserve requirements.

    This securitization process takes on a party atmosphere of lending and selling, lending and selling, and because so much money is being made with fees and such the lending requirements grow looser and looser until suddenly there is no further market for loans – like shoving a stick into the spokes of a spinning bicycle wheel. Without securitization, we are back to banks holding loans that are then capped by reserve requirements.

    This is the credit crunch, and it’s not so much that loans are not available but the comparative amount of loans available versus what is needed to sustain a credit bubble – this amount cannot be provided by the amount of bank reserves.

    I believe this is the reason for the change coming in October 2011 – a safety valve for the Fed if the securitization market again falters; if so, reserve requirements can be dropped to zero and the party never loses a beat.

    Of course, all those safeguards built up over time after 1929 will be gone, but, hey, it’s different this time and we know how to avoid depression – our Fed chair is an expert in that field.

    Of course, Irving Fisher was an expert, too, and following his advice didn’t turn out so hot.

  33. Jim K commented on Oct 13

    It’s just more proof (as if we needed it) that economics, and by extension the markets, is based on fantasy and promise rather than reality and need.

    Reality is a backdrop of falling food, water and energy production the world over in the face of rising demand. Reality is daily unsustainable environmental damage, population growth and debt growth. Reality is today’s ‘growth’ (a grotesquely hollow measure) at the cost of our collective futures.

    Surely the base of economics/markets/business system is mostly and ultimately people’s time, the sun’s energy and what you can produce (or claw out of) the land. All main factors we now face appear to make all of these inputs either scarcer or more demanded.

    Market, financial and economic statistics are at best historical and at worst meaningless. They are a deliberately simple mathematical model of a fraction of the real world, NOT reality, never have been and never can be. Why accept their ‘wisdom’ if they fail us on such a regular basis?

    Questions: When is reality going to again be part of economics? When are we going to price in the intangibles? When is reality going to be a permanent and fundamental part of the analysis on this site?

    I’ve lost faith in the fundamentalist religion to which most the western world is devout. Globalised economics ain’t working, guys, is it?

    Here’s a big picture question: Where the hell do we go from here?

    (sorry, rant/aching disillusionment over now, thanks)

  34. mm commented on Oct 13

    the market is the market. for the guys who got out because the internals were bad two words: trailing stops!

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