Could that deafening smacking sound be the lips of a million traders waxing ecstatic over the prospect of shorting into this rally? Three words of advice: Be very careful. Like you, we would absolutely love to get short somewhere near these levels, since it seems beyond argument that the rally, powerful as it has been, is a short-squeeze destined to end badly for buyers. But that doesn't necessarily mean the illusion cannot continue for long enough to ravage every last bear before the inevitable downturn comes. We warned of this in our trade analysis yesterday of the E-mini S&P futures, writing as follows: '[Tuesday's] deftly manipulated short-squeeze had 'fraud' written all over it, but that doesn't necessarily mean the rally can't mutate insidiously into the real thing if other bears become as cocksure as we are that stocks aren't going much higher.' (Click to enlarge -- but why?) The sort of mutation we had feared took a Frankenrally turn yesterday when stocks exploded higher in the final hour. They'd been noodling around for most of the day after testing the previous day's abysmal lows around mid-session. But few could have been prepared for what happened next: The clock struck three at the NYSE, and bears evidently freaked at the realization that, with just 60 minutes left in the day, stocks were showing no propensity to give up their ill-gotten gains. The panic hit full-bore within minutes, pushing the Dow Industrials 360 points higher in just under an hour. Measured from the intraday low, the gain was 631 points. Not bad for a stock market staring into the maw of what promises to be the most severe recession since 1973. Citi Is Toast For our part, we were keen to short the shares of Citi as it made its way higher
LATEST TRADES
