So, the Street supposedly believes the worst of the credit crunch might be over. We'd say that's a tad optimistic, considering the real estate sector is still weakening and likely to deteriorate even further because of the huge backlog of unsold homes. Regardless, DaBoyz evidently are going to need a story with more sizzle to re-ignite the short-squeeze that has provided nearly every dime of buying power since stocks bottomed in mid-August. Short-covering got the current week off to a strong start, with the Dow Industrials up nearly 200 points on Monday. But since then the market has looked pretty punk, declining for two straight days just when bears appeared to be on the ropes. In the surprising absence of any follow-through to Monday's short-squeeze, attention has shifted to the release on Friday of payroll figures for September. Supposedly, investors are hoping for a strong report, since it would imply the economy is on the upswing. If this is so, it would suggest that a significant change has occurred in their thinking. For years, Wall Street's obsessive concern has been that the economy would turn 'too strong' to warrant Fed easing. Now, investors evidently are hoping for statistical evidence of strength even though it could discourage the Fed from opening the taps. What might account for the change of heart? Our hunch is that many people no longer believe the mere availability of easy credit is likely to jump-start an economy that has become so deeply mired in real estate deflation. While it's hardly farfetched to imagine that a 'strong' payroll report on Friday might stimulate a brief short-covering rally, we think buyer's remorse is likely to follow quickly. Unless the economy can show more than a few blips of phony statistical strength, and soon, stocks will not long continue
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