There must be quite a few more nervous shorts out there than we'd imagined. The Dow Industrials shot up 257 points yesterday, but take a look at the news that drove shares ebulliently higher: Intel earnings for the first quarter were off by 12%, and JP Morgan's profits suffered a whopping 50% decline. For good measure, Morgan also noted that the credit crunch is likely to weigh on its business at least until 2009. It tells you how abysmally low expectations must be these days when news like that can touch off a headline short-squeeze on Wall Street. Then again, considering how the earnings news was spun, who could blame bears for thinking it might not be such a bad idea to run for the hills? When Morgan weighed in on the tape, and stocks responded by going higher, we were told that 'analysts' had been 'expecting' the numbers to be far worse. We've put quotes around those two words because we have our doubts that yesterday's short-squeeze represented some kind of measured response to specific forecasts made by human beings. (To paraphrase Butch Cassidy: 'Who are those guys, anyway?') Our gut feeling is that if Morgan had announced anything short of bankruptcy, stocks would have done more or less what they did. Which is to say, the Dow's crazed thrust was ordained by forces beyond our understanding; and, moreover, any news short of Armageddon would have made no difference whatsoever. 12.5% from Highs Which brings us back to the rally's cause: nervous shorts. We've continually emphasized that there is almost zero buying of stocks these days by bulls, only by bears covering short positions turned menacing. But while bulls may sneer at the notion that this country is headed into a recession that will make the 1973-74 Marianas Trench
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