With fun­da­men­tals, tech­ni­cals, and now even head­lines out of Europe largely irrel­e­vant, it only leaves one market-moving thing: rumors. And yes­ter­day was a ter­rific exam­ple of pre­cisely this. Art Cashin does a "rumor by rumor" expose of the key "events", how­ever unfac­tual, that moved stocks yes­ter­day. If his­tory is any indi­ca­tion, and it is, today will likely see the rumor brigade unleashed all over again shortly.

From UBS:

Rumor­mon­gers Hold A Con­ven­tion, Send­ing Mar­ket On A Roller Coaster Ride — Traders spent Tuesday’s ses­sion with one eye on Europe and one ear pressed to the rumor mill.

Early on, the com­mod­ity boys were push­ing the idea that the 2:15 FOMC state­ment would come with a hint of a QE3 pro­gram. That rumor never quite gained full trac­tion but its pro­po­nents kept push­ing it.

The hope of the QE stim­u­lus and some early strength out of Euro allowed U.S. stocks to open better.

Then around 10:00, two dif­fer­ent rumors col­lided. One was that Merkel had given a thumbs down on Euro­pean bonds to fund the res­cue pro­gram. The sec­ond was that Iran was run­ning mil­i­tary exer­cises around the Strait of Hor­muz and, as part of the exer­cises, might shut down the Strait.

The Hor­muz rumor sent oil up nearly $3 and scared off some bids in stocks. The Merkel rumored scared off even more stock mar­ket buy­ers. The trou­ble with the rumors was that they had both been around before. The Hor­muz story was around Mon­day and the Merkel story was around on Fri­day. But, as we say on Wall Street, a rumor with­out a leg to stand on will find some other way to get around. So, for some inex­plic­a­ble rea­son, the two semi-stale rumors caught hold on Tues­day morning.

The rumor related sell­ing ended shortly after 11:00 and stocks churned sideways.

The rumor­mon­gers were not through, how­ever. A story began to cir­cu­late that the CIA or maybe NATO was set­ting up mil­i­tary train­ing camps in Jor­dan or Turkey or maybe both. The camps were said to be for train­ing and arm­ing Syr­ian dis­si­dents to over­throw Assad. This rumor never seemed to get real traction.

The side­ways churn­ing con­tin­ued into the FOMC state­ment at 2:15. The mon­gers kept push­ing the QE3 hope all the way to the statement.

When the state­ment hit, there was vir­tu­ally noth­ing new and cer­tainly no hint of any QE in the vis­i­ble future.

Stocks began to sell off. The sell­ing accel­er­ated as new rumors popped up. These rumors main­tained that the S&P might down­grade one or more Euro­pean sov­er­eigns overnight. That put renewed pres­sure on the Euro and stocks.

The sell­ing con­tin­ued until about 3:40. Then, influ­enced by mar­ket on close orders that were heav­ily tilted to the buy side, the bulls cir­cled the wag­ons and trimmed some of the losses.

Unfor­tu­nately, the action on the close swelled the vol­ume enough to make Tues­day a “dis­tri­b­u­tion day”. Traders won­dered if they should con­sider putting  Santa’s pic­ture on a milk carton.

Read more from the author/contributor here.

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