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The White Hurricane

October 29, 2012

So in addition to dealing with the Benghazi scandal, Syrian atrocities, Euroquake, the “fiscal cliff,” a stalled U.S. economy, softening earnings momentum, waning revenues, a dysfunctional government, the nastiest campaign I have ever seen, and who Taylor Swift should date next, Wall Street now has to contend with the potential of being flooded out. What is fascinating, at least to me, is how well the equity markets have held together despite the deluge of dour news.
-Jeffrey Saut, managing director, Raymond James & Associates

“Unseasonably mild and clearing” was the weather forecast going into the Ides of March back in the year of 1888. And it was true, as temperatures hovered in the 40s and 50s along the East Coast. However, torrential rains began falling, and on March 12th, the rain changed to heavy snow, temperatures plunged, and sustained winds of more than fifty miles per hour blew. The “Great White Hurricane” had begun! In the next 36 hours, some 50 inches of snow would blanket New York City, and the winds would whip that snow into 40- to 50-foot snowdrifts. Telegraph and telephone lines were snapped, fire stations were immobilized, New Yorkers could not get out of their homes, 200 ships were blown aground, and 400 people would die before the storm was over. The resulting transportation crisis led to the construction of New York’s subway system.

I revisit The White Hurricane this morning because it potentially looks like another 100-year storm is heading pretty close to Manhattan. While in modern day it shouldn’t cause the horror seen in 1888, it is still a force to be reckoned with. If, by chance, the storm heads up the Hudson River it could cause the partial evacuation of New York City. So in addition to dealing with the Benghazi scandal, Syrian atrocities, Euroquake, the “fiscal cliff,” a stalled U.S. economy, softening earnings momentum, waning revenues, a dysfunctional government, the nastiest campaign I have ever seen, and who Taylor Swift should date next, Wall Street now has to contend with the potential of being flooded out. What is fascinating, at least to me, is how well the equity markets have held together despite the deluge of dour news. Indeed, while I was laid up with the flu most of last week, the S&P 500 (SPX/1411.94) was also “laid up,” locked in a trading range between roughly 1407 and 1420 the past three trading sessions. As stated in my daily reports (The Morning Tack):

“About the most constructive thing I can say concerning the recent action is that the SPX has been trying to hold around the intraday lows (@1407). The quid pro quo is that it has not been able to travel decisively above the 1418 ‘pivot point’ I was using as a downside ‘energy level’ for three weeks (read: on a short-term trading basis we should have held above 1418).”

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