Am I missing something? Why the big deal? S&P chopped around a 5 point range all day. A 4 point drop is a big deal? I think some of you guys are getting screen hypnosis! ES volume lowest since Columbus day. End of the month, traders off....just nothing going on boys!
Seen this in Oct 1998, here is the chart. Notice that the consolidation started in mid Oct 1998. Interesting similarity comparing to the current scenerio.
Actually, there's no similarity at all. The "asian crisis" was ongoing, Russia was in big trouble, interest rates had been at 5.5, and the LCTM collapse spooked everyone. Then Greenspan made three rapid interest-rate cuts to jolt the market, which they did. After that, we continued the uptrend and spent most of 1999 in a holding pattern. And valuations were nowhere near where they are now.
LOL. Recent mini crash in Russia, some wide range down days off swing highs in Asia, Fannie Mae..., IMO there are some eerie parallels. However no, the Fed certainly doesn't have the bullets left for the rapid rate cuts as in '98, nor does the market, at least to me, technically resemble that fateful autumn. Still waiting for that close above 1050 that refuses to happen.
I don't know that they're so "eerie". The Nikkei was coming off a top, not a bottom. The situation at FNM has nothing to do with LCTM. And we don't have Y2K to bail us out. Anyone looking for a repeat is going to be disappointed.
Y2K? That obnoxious rally was still 14 months down the pipeline. And agreed FNM is not LCTM...yet! Just prognosticating here. The coming mortgage debacle will make the demise of a leveraged yield curve participant look tame by comparison.
I agree with your great post, and I think any difference in interpretation is due to semantics. My view is that liquidity is a function of the relative aggressiveness of buyers and sellers. If there is no liquidity at a level, either the buyers have overcome the sellers at a particular level, or the sellers are being passive (not putting up offers). A little of both may also be true. A buyer or group of buyers who wants to take 1000 contracts at a level when there are only 50 for sale at the ask would be an example of a liquidity imbalance. In this case if the buyers really want to buy (are more interested in being filled than in getting a good price so they are aggressive in their buying) they may continue bidding price up until the price reaches a level where there are enough sellers willing to put up size offers. You could look at this and say there wasn't enough liquidity on the sell side, and you'd be right. You could also say, if the buyers had been willing to just post their contracts on the bid (if the buyers were passive) and wait for the sellers to hit their price, rather than bidding price up in order to get an immediate fill then the price wouldn't have moved, and there may not have been a liquidity issue (though the buyers also might not have gotten their fill). It's really two sides of the same coin IMO. So to get back to Friday, you could say there were more sellers than buyers at the 1051 level, so price moved down to the 1048 level where the sellers were able to find sufficient liquidity to fill their supply.