Breslow: "Everyone But Me Seems Sure They Know How Things Will Play Out"

If there is a recurring theme among trader commentary this morning - and over the past few days as market volatility has come back with a vengeance and as stocks make increasingly more frustrating daily moves - it is this: confusion. And whether it was a short squeeze, as Bill Blain claims, or a logical progression after a "long overdue correction" as most pundits on CNBC claim, everyone seems to have an opinion about what will happen next.

Everyone, except for Bloomberg macro commentator Richard Breslow whose note this morning slams all those who seem "adamantly sure they know how things will play out and therefore where asset prices are going."

He then mocks the almost instant U-turn in opinions, noting that "from a purely mental health point of interest, it should be surprising that so many traders who were saying just yesterday morning that the world was coming to an end aren’t taking this reprieve to do something about it. It would appear that too much trade location was sacrificed and this leap higher looks painful rather than amazingly fortuitous."

Clearly angry, he says that "we’ve gone from “get out, don’t you know we’re in a correction that’s heading straight to becoming a bear market” to “Yo loser, you have to be in it to win it. And by the way, where’s your stinkin’ correction now?”

That’s an awfully big leap that equity traders seem hell-bent on making over and over. The market has been volatile enough on its own without traders manufacturing a bunch all by themselves.

Of course, by traders Breslow means algos, for whom intraday market "logic" is something totally different than for ordinary humans, who needs patterns, momentum and repeatability (not to mention at least some fundamental analysis) to make sense of what is coming next.

And while we commiserate with Breslow"s frustration, especially after the latest 1000 Dow point surge...

... just as "experts" were calling the end of the bull market with the 200DMA "clearly broken", we can only note that this is the world traders created for themselves, one loud on noise, weak on signal, and still flooded with trillions in central bank liquidity which makes furious short squeezes like the one observed in the past 48 hours all too easy.

His full note is below:

Carry On as Is -- If You Want to Hurt Yourself

Everyone but me seems adamantly sure they know how things will play out and therefore where asset prices are going. It’s hard not to feel caught in the middle. And a big middle it is because the bid offered spread on opinions just keeps widening. In an environment of such uncertainty, I’d expect, or at least hope, that being very granular would be the way to navigate markets. Instead, commentators are busy hunting elephants with grandiose opinions. And how’s that been working out?

I was asked to make a presentation about where I think markets are going. Accidentally, I hit send on a single slide that just had TKTK (print jargon for “To Come”) written on it. Before I hit retract, it struck me that in many ways it wasn’t a bad place to start.

There won’t be any telling you where things are actually going to go. It would take all the fun out of things. No spoiler alerts allowed here. But from a purely mental health point of interest, it should be surprising that so many traders who were saying just yesterday morning that the world was coming to an end aren’t taking this reprieve to do something about it. It would appear that too much trade location was sacrificed and this leap higher looks painful rather than amazingly fortuitous.

And there lies the problem with opinions being so diametrically opposed. Today, it’s not things have calmed down a bit. It’s trade tensions ebb. “Bellicose” has been replaced with “Calm Reasoning”.

We’ve gone from “get out, don’t you know we’re in a correction that’s heading straight to becoming a bear market” to “Yo loser, you have to be in it to win it. And by the way, where’s your stinkin’ correction now?” That’s an awfully big leap that equity traders seem hell-bent on making over and over. The market has been volatile enough on its own without traders manufacturing a bunch all by themselves.

Perhaps it explains why, if you look at the E-Mini over the last two weeks, you would see a lot, lot of noise accomplishing very little. Precisely because, at the end of the day, we are giving certainty to events that remain unknowable. Not to mention hugely public figures whose thought processes are opaque, to say the least.

During QE, everything moved in similar directions, even if sometimes at different speeds. We’re now entering a period when an ailing sector can fall behind without necessarily being an obvious sign of sickness in everything. Picking winners and losers used to be what we sold. It would be wise to try to jog some of those muscle memories. And understand the effect this will have on central bank reaction functions.

And since everyone is once again an expert on Ancient Greece given the super-power contretemps, my factlet for the day is that Thucydides never actually used the expression “Peloponnesian War.” But it does show that you can sometimes lose the war but win the peace.