Dull Holiday News Drives Stocks Wild

It’s days like yesterday that seem to suggest the central banks could keep stocks afloat more or less indefinitely. How can shares possibly go down as long as there’s a sea of digital dollars to support institutional players with no better use for interest-free money? Actually, it took relatively few dollars to push the Dow Industrials up 260 points at the apex of yesterday’s short-squeeze.  That’s because the rally was all but over minutes after it began. Stocks opened on a gap well above Friday’s close, with almost no shares changing hands in-between.  Indeed, it wasn’t a buying stampede that added tens of billions of dollars to the value of publically traded stocks; rather, it was the premium sellers tacked on when pent-up demand, mostly from bears, exploded after a three-day holiday.

With shorts caught in the ringer, why would sellers want to get in the way of the resulting melt-up? So they stepped aside. And anyone who was not long stocks when the market closed on Friday was locked out.  In retrospect, we can’t understand why we weren’t in more of a betting mood ourselves when trading wound down last Friday, the final session of the year. Betting the pass line would seem to have been a no-brainer for anyone who “knew” that nothing horrific would happen over the weekend.  As it happened, the headlines concerned arson in L.A. and the Iowa caucus. No scary new bailout plans from Europe. No tankers sunk in the Strait of Hormuz. Just routine stuff.

Although popular wisdom has always said the stock market hates uncertainty, these days it would appear that nothing thrills Wall Street quite like a dull-news weekend.