At that point Twitter shares accelerated their gains more quickly than did all of the other social, mobile and cloud-computing stocks -- which had already been rallying. Twitter never looked back, traveling from $41.14 at 1:11 a.m. straight up to $45.52 at the close -- the most vicious of all the ralliers from the ne'er-do-well crowd of both tech and biotech.
I only point this one out because Twitter had been the weakest in the cohort. It was certainly the most "shortable" name -- because, until Monday, we had thought that billions of dollars in insider selling would be coming in Twitter. We learned that holders responsible for the vast plurality of stock would not be selling any time soon, and when that happened, it took away the potential supply that would be needed to handle the massive short position that had been developing.
Do not minimize the significance of that announcement. Forty-five million shares, or 40% of the current float of Twitter, are sold short. The non-sellers, co-founders Evan Williams and Jack Dorsey, control 9.4% and 4%, while Dick Costolo owns 1.4%. Benchmark, the key venture capitalist, has a 5.4% stake. Together that's 20.2% of the locked-up stock. You also have to believe that those four shareholders are powerful enough to intimidate others not to sell. That means the short position is way too big for the float on any good news, like an acceleration in sales or earnings -- which are distinct possibilities.
Given the vociferous way this stock traded after the Graf announcement, lots of people were led to believe that we had just experienced a Twitter-led rally -- that the market had a new leader that had previously been the biggest decliner of this ugly era, a stock that had decline 30% for the year. People thought that this rally signaled, "Enough is enough." But I think we saw one of those "enough is enough" rallies just last week, so I am not going to be so sanguine.Nonetheless, this move at least felt as if it had a bit of news associated with it. It also coincided with the possibility that interest rates on the 10-year Treasury may have troughed at about 2.5%. In any case, let's go back to that bottom in the stock market. This much is clear from the sequence: Two minutes before 1 p.m., forced selling ended, regardless of the price level. What happened at that time? That was really the last safe moment you had to beat the margin clerks who would otherwise margin you out or sell your stuff for you at any price they wanted, so they'd be able to ensure that you wouldn't stiff them. Now, it isn't clear how the bond peak fits in. It's possible the shorts and high-frequency traders all know the sellers' game plans. That's easy enough to discern. You probably wouldn't get as strong a pivot at that hour off the margin action without the bonds. Maybe the whole thing is coincidence -- although you would have to be a complete moron to believe that. So if we put it all together, we can conclude several things. First, the damaged flailing sellers were being margined out first in their biotechs, and then in their techs. Second, the buyers knew this, and they also were attuned to the peak in bond prices.