Not by coincidence, the band SQUEEZE came to mind this morning as the equity markets went stratospheric on open, and then continued to trade higher.
And not too surprisingly, given the truly MASSIVE short base out there, we hear that most of the active buying today is from short covering... more interestingly, long trades (whether long onlies or fast money) are pretty sparse. So either the market is going to be unanimously right, which would be a first, or the markets actually could squeeze higher.
I don't like the fundamentals out there, as you can tell from my previous posts (eg this one, and this one), but technically we could be seeing a market with... yes... legs (though I am a lot less comfortable than I was back in July!!!)
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Besides the basic problem with US housing markets and climbing unemployment (don't tell me it's a backward looking indicator), you have the credit worthiness of the Treasury on the line... so even if spreads DO come down, and there miraculously IS some kind of fresh demand for housing in the foreseeable future, a weakened USD /higher Treasury yields could undo all that. Early trading in 10Y today not too encouraging...
Medium term? IMHO, we're "Truly up the Junction..."
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Stumble It!::
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3 comments:
Don’t you think that over the 1-year decline the market has to come to some oversold levels? Taking into account that after high volume in June/July 2008 we had some rebound I think it would be logical to expect some rebound after recent high volume.
Hi Joe - I absolutely agree that there could well be a rally, even with fundamentals that are still shaky to say the least.
Yes, the decline over the last year and the volatility we've experienced since then plus the size of the short base sets us up for a good squeeze... all it needs is for nobody to believe it will happen.
The consensus view that's building seems to be that Paulson had little choice (rock, hard place, rock...) but that it's just an opportunity to cover shorts now and put them back on in size a little higher.
S&P500 volume Monday up but still not that high - conviction still low.
So very Squeezable, in my opinion - a market with legs.
Thanks for the comment.
HT
As you said "all it needs is for nobody to believe it will happen.", I may only add "and when it start to move up everybody will believe that this is just a correction within a dominant down-trend..."
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