Could the phony short squeeze that began last week be mutating into a more or less 'real,' albeit doomed, rally? It certainly seems like it. We had warned of this when we wrote as follows, referring to the S&P mini-futures: 'Yesterday'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.' The warning was intended to be tongue-in-cheek, calling attention as it did to our dangerous certitude that stocks would not get very far before the reality of a failing U.S. economy slapped them down. But with yesterday's latest, 177-point installment, the Dow Industrial Average bid fair to make us think there may actually be buyers out there other than short-covering bears. The twelve years we spent on the trading floor conditioned us to view all rallies and declines as manipulated to some extent. With respect to yesterday's dog-and-pony show, it was the nature of the manipulation itself that suggested benighted bulls are slowly wresting temporary control of the stock market from enlightened bears. Specifically, the rally occurred in three stages, reflecting a relatively daring and elaborate ruse that probably would have been too risky for DaBoyz to attempt last week, when stocks were reeling in chaos. The crucial stage occurred Sunday night in thin markets, when most traders were sleeping. Our forecast had anticipated a 13.25-point drop, precisely, from Friday's settlement price, and we had even advised night-owl subscribers to try bottom-fishing at the target, 1314.50, with a very tight stop-loss. But when the dust had settled, the futures had made their overnight low fully 3.25 points beneath the target, hinting of further weakness to come. Gamble Paid Off And so it did,
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