Lately we’ve seen stock prices pulled by two opposing forces. Forecasts centered on joblessness drag markets down while admirable financial results at large corporations yank quotes back up. This appears to be playing out within a big picture fighting hard to overlook an embarrassingly resilient core economy comprising everyone who hasn’t been laid off yet plus those with income not tied to the manufacturing or housing sectors.
Lets look at this morning’s now 256 point rally in the Dow in terms of what we’re blogging about, short-selling.
Short-sellers attack margin accounts first. Investors borrowing money to buy stocks have to sell when market quotes drop, precisely what shorts are trying to force people to do. That vulnerability makes the cash margin there an easy target.
Now, marks only borrow to buy stocks with excellent prospects of going up, so these issues always draw a lot of short interest. Stock rising 10% in today’s environment is likely to get chopped by 20% when shorts get their chance to go after that quote. Force the margin boys to liquidate that way.
Start looking for this yourself, and you'll see what we mean. Short-sellers take great stocks on this insane roller coaster ride that scares a lot of good people away from them.
This morning, the tide turned against short-sellers, forcing them to scramble, cut back on some positions, maybe go net long for a spell. Were this to continue, we’d be looking at the turnaround generating a new bull move. Otherwise, it’s just a short-covering rally. Shorts repositioning somewhat, then shorting with a vengeance when the updraft has run its course.
Who knows which way this will play out? Don’t look here for market advice. Prices get turned by the likes of Pockets Mulgoon, mobsters doing their dirty work together, operating as one, pouring all the money they need into what they’ve decided the market is going to do, and the bloodsucking thieves play it so close to the vest that people like you and me will never ever know what’s coming at us next.
Price moves have nothing to do with anything but mob phone calls.
Whatever, I'd guess that this Yin-Yang thing is too profitable to give up, so it seems a sure bet that confusion will continue to reign.
