The entire rally today was bumping against the 50 day moving average. Institutions are attempting to convert the scared masses in to bulls just long enough to dump their own loser positions. Chartists claim a double bottom, even though the second low was lower making that impossible.
The Federal Reserve has been trying to put bottoms (or “glass floors”) in this shaky market, and failing since August. Today we rallied on the notion that Bear Stearns being bought for $10 a share instead of $2 a share is somehow confidence inspiring news.
“We’re range bound here from about 1250-1390. The question of the day is whether it could decisively break above the 50 day moving average around 1350.” - NYSE floor trader
The Bear Stearns debacle gave investors the absurd notion that if they can sell for $10 a share now, then perhaps the problem wasn’t so bad after all. If it wasn’t so bad then why were they an emergency weekend fire sale brokered by the Fed? I call Shenanigans on the whole rally and if it doesn’t stop here, it will stop before 1400. The next downleg will test 1250 and probably break if there’s any real fear to it.
There’s also lot of talk of shorting bonds, commodities and other currencies and going long equities. I don’t think it has merit just yet. A lot of the negative price action in commodities was highly leveraged hedge funds getting their leverage pulled back from their bankers.
The media keeps calling a bottom any chance it can get. To me that’s the ultimate contrarian indicator of more trouble to come.
Lots of investors are “in” and lots of shorts have covered, leaving room for the entire bus full of bulls to go right off a cliff. Grab some popcorn and watch the show.