You remember the day of the flash crash: images of protests in Athens flashing on CNBC seemed to help drive the initial selling that got the dive really going.
Since then, intense imagery has been associated with market declines, and conversely, the lack of imagery has helped stocks gain, prompting what Art Cashin calls the “ostrich rally” in today’s note.
The Ostrich Rally – Traders have watched with growing interest a phenomenon that seems to have grown from the first days of the demonstrations in Athens.
Simply put, if there is chaos on the screen, the stock market frets and often falls. If, a day or so later, the screen is filled with talking heads, the market rebounds (even though the talking heads happen to be talking about on-going chaos in the streets). In essence – if I can’t see it, it can’t hurt me.
The result has been a replacement of the Goldilocks market with a current “yo-yo” market. Down one day then up the next. Yesterday was no exception.
With reporters access to Libya restricted, there were few images of chaos and killing in the streets. There were reports of the same but no images.
Stocks started choppily but managed to regroup within minutes. They re-surfaced the whacky “K. Daffy wants to negotiate” rumour resurfaced. The boys in the oil pits seemed to take the bait for the second time. Lower oil sent stocks higher.
A bit later, upbeat comments from Bank of America’s investor day seemed to help all the financials.
That was pretty much it. Stocks hit their high around noon. They then moved choppily sideways for the balance of the day.
In the final hour, they tried to punch to new highs but never got the volume or the vigor to pull it off. A nice day for the bulls but no bonanza.