BEHIND THE MONEY: Whether on Vegas or Wall Street, No Appetite to Let Winners Run
"We are seeing changing patterns of behavior at the table," said Steve Wynn, Wynn Resorts Chairman, on the company's earnings conference call last night. "People are being more cautious. When they win, they are playing for shorter periods of time. A blackjack player gets up, or a Baccarat player gets up at the table, and he jumps up and leaves if he is a winner. Where before they said, 'Oh boy, we've got the house's money, let's play longer'."
That's the same attitude for traders in this market. When they get a 4% pop like they did yesterday, they will likely take some profits, even if some of them did find Obama's State of the Union speech quite uplifting.
FM trader Jeff Macke liked Obama's speech a lot but is still apt to take profits in stocks like Morgan Stanley when they move nearly 20% in one day. This collective behavior by traders may mean we're likely to bounce along these lows for quite some time. At least until investors get just a small increase in clarity on the economic front and the policy front...say release of the financial 'stress test' results.
The good news is that maybe the market won't get much worse. A technical analyst that I follow, John Kosar, notes that at this 11-year low, the S&P 500 and key industry groups are bumping up against some pretty staid support levels. For example, the S&P 500 would need to break through lows marked in 1997 and 1996 in order to fall another 10% to 681.
"The latest data continue to suggest that an extended decline from here is unlikely without at least a appreciable, 1-2 month corrective rebound first," wrote Kosar, President of Asbury research in Chicago, in a note to clients this week. Kosar will defend his position tonight on the show.
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