Closing fractional declines belie a record-making and breaking volatile session as bargain-hunting trumps further risk aversion plans by bears. As of 16:00 ET the “SPYder” (SPY) and “Cubes” (QQQQ) are down but not out by .40% to .65% on continued institutionalized daytrading efforts.

Quite simply, “Wow!” Statisticians will be able to give a more quantitative appraisal of Friday’s incredible price volatility, but it might just be enough to say, “Down nearly 8% out-the-gate. Rally in the alley to unchanged in less than six 5-minute candlesticks. Next and for the better part of the session; a plethora of 2% to 4% intraday price swings occurred. Then, two near retests of lows at 13:50 ET and 14:55 ET had bulls bailing. Finally, a jump of almost 12% in forty minutes to the 15:35 highs was followed by a gentle schnitzel of 4% minutes later and then our ho-hum and near flat line finish to close out the session.” “BOOandMOOyah!”

What drove investors to jeers and cheers? The usual suspects of continued tightness in credit markets such as TED and jumping levels of worries / negative sentiment regarding the economy certainly played crucial roles. Further corralling of bulls to multi-year lows came courtesy of a global overnight meltdown spearheaded by the collapse of Japan’s Yamato Life Insurance. For its part the Nikkei sank nearly 10% on top of existing and debilitating weekly losses.

Elsewhere and making grizzly noises aimed at telling bulls they weren’t out of the woods, Anchor Bankers Morgan Stanley (MS) and Goldman (GS) were nominated for Best In Breed designations. Well not really, but credit ratings agency Moody’s saw fit to put both under review for downgrades regarding their long-term credit prospects. The news hit both stocks with intraday losses in excess of 30% for Goldie and 50% for Morgan, before recovering to still severe 12.38% and 22.25% schnitzels respectively.

Also haunting bulls in a negative capacity and shortly after their first celebratory round of “the bottom is in!” was the ghost of Lehman Brothers. The now defunct banker saw its bonds auctioned off at a lowly 8.63 cents on the Benjamin Franklin by CDS sellers. Translated very loosely, the pricing resulted in steep losses for the firms caught selling cheap and uncollateralized OTM puts based on Lehman not folding on its debt; which it didn’t. The fact the sale went down so poorly, weighed in on existing and easily-plied negative crowd sentiment.

For the bulls, holding its own throughout the session and trying to bring good things to the lives of market investors, shares of GE (GE) finished up 13.10% at 21.50. The Dow component posted a 10% year-over-year decline in profits, but matched Street views of $0.45 per share. Also important, with recent worries over the company’s GE Capital unit and its credit market exposure, the absence of the financial confessional by management was a relief and bonafide market support.

In other intertwined and tangled markets, commodity products such as Comex Gold (GLD) and Black Gold (USO) both registered hard losses on the session. For the former, traders’ unreliable primordial flight-to-safety instinct was M.I.A. despite the CNBC “We Know Drama!” movements in global markets and fore-described economic concerns.

A slight increase in the Greenback (UUP) after setting fresh yearly highs may have been behind some of decline in the Yellow Metal. As for those other crude realities, the combined one-two punch of stronger Benjamin’s and traders collective and concentrated efforts at doom and gloom hysterics and its impact on consumption, were very much apparent. As of Friday’s close, shares of the USO skidded by 4.45%, while GLD lost some of its recent luster with a decline of 7.43% at 83.22.

And finally, after staging a near-miraculous bargain-hunting recovery effort in the final minutes of trade, bulls from Wall & Main and beyond are likely saying “TGIF.” They’re probably also wishing the markets, like the few banks still left standing, were closed for the upcoming Columbus Day holiday on Monday. Better yet and given the circumstances, maybe it would be best if those banks stayed open for “business as unusual”—and as not to give customers any wise ideas of further problems. Have a great weekend. 

Chris Tyler
Staff Writer & Options Strategist
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The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.