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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Giordano Bruno who wrote (201591)	5/10/2009 12:22:52 PM
From: GraceZ	Read Replies (1) \| Respond to of 306849

Another sign of fakery – apart from the implausible 'V' shape – is the "dash for trash" in this rally. The mostly heavily shorted stocks are up 70pc: the least shorted are up 21pc. Stocks with bad fundamentals in SocGen's model (Anheuser-Busch, Cairn Energy, Ericsson) are up 60pc: the best are up 30pc. This is always the case at the beginning of every upturn because short positions have to be closed. Markets don't rally out of lows from long buying, the long buyer comes in much later. It is shorts buying to close their winning positions who mark the turn. Shorts retaking positions higher and then closing them at a loss drive things up further than they ever would get from long buying. The long investors, looking for "good" companies tend to sit and wait for pull backs that never come! If anything long buying drives down prices (people buying bargains that then become bigger bargains) and short selling drives it up as the price moves in the direction of the bulk of demand or supply. In the beginning of a rising market the bulk of demand for buying long is always below the existing price, but almost all short buy stops are set above as are short sell limit orders, price has to find the "book". The shell shocked longs also add to the upward momentum. They set sell limit orders above, all the while uttering that timeless prayer to the market gods where they swear that, "Please, please, please, God, if the stock price just gets back to xyz I will sell it and never again buy another stock."