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Some of us know the old poem but the punch lines always was: "All the king's horses, and all the king's men, couldn't put Humpty together again." But times have changed we're told...again. France and Germany have mandated that Greece and any other EU member will be saved no matter what. How many times have we heard this? Too often to mention.
Nevertheless, the chart we posted last night regarding the high level of short interest in SPY (SPDR S&P 500 ETF) matched levels not seen since 2009. This was the setup for a short squeeze and this is what we saw Wednesday. This rally combined with Monday and Tuesday wiped-out most of Friday's large losses. Bulls weren't much bothered by Moody's downgrade of two French banks; Credit Agicole and Societe Generale since these threats were much expected so they say.
Stocks rallied mightily supposedly due to Merkel's and Sarkozy's comments. Clearly HFT algos were programmed to respond positively and they did. You'll note heavy profit-taking in the last 20 minutes which is the opposite of Tuesday's computer driven jam-job. (You won't hear any HFT whining today from the financial media.)
Most stocks rallying had financial engineering and/or M&A type features coloring them. Dell (DELL) would buyback more shares; General Electric (GE) would cash-out Buffett; Cisco (CSCO) moderated its outlook; and, vultures were circling Yahoo (YHOO).
Gold fell less than 1% while the dollar fell .25%. Oil was down over 1% on higher supply data, commodities overall were weak and bonds were higher on the day.
Volume remains elevated and breadth per the WSJ was quite positive once again perhaps even taking us to short-term overbought conditions.
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