The stock market’s miraculous recovery in the final two hours of Friday’s session could have made one lose sight of why stocks were down in the first place. Come to think of it, why were they down? Investors began the the day supposedly concerned about whether Greece might have to hock the Acropolis to buy time from creditors. Amidst all the nail-biting, U.S. shares fell hard in the early going. But when the selling began to dry up around mid-afternoon, DaBoyz squeezed shorts with the kind of viciousness we haven’t seen since the running of the bears in the weeks before Thanksgiving. And Greece? As the weekend drew to a close, analysts were debating whether the country’s problems held any implications at all for U.S. stocks, much less dire implications. “Should the woes of a country with fewer people than metropolitan Los Angeles really roil the massive U.S. markets,” asked the Wall Street Journal, evidently having fogotten how just one company, AIG, nearly took down the whole world, financially speaking.
We don’t know whether the Journal’s bold insouciance portends a mood change at the opening bell on Monday morning, but the Darth Vader-types who supposedly move the markets will have their hands full trying to reverse a selloff that is about to enter its third week. The Dow Industrials have fallen about 900 points during that time, or a little more than eight percent, bringing them down to 9835 at Friday’s lows. However, our forecast calls for still more slippage to at least 9628 before it will be safe for bulls to come out of their bomb shelters. We’ll want to load up the truck for a robust short-squeeze rally if the target is reached, but in the meantime we wouldn’t touch stocks other than to short them. Since we never want to chisel any forecast in stone, we’ll use a 10433 benchmark to warn if bulls return to life with sufficient vigor to push the market to new recovery highs.
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President Obama, Bernanke, and Jim Cramer are in a MOVIE about hedge funds called “Stock Shock.” Even though the movie mostly focuses on Sirius XM stock being naked-short-sold to near bankruptcy (5 cents/share), I liked it because it exposes the dark side of Wall Street and reveals some of their secrets. DVD is everywhere but cheaper at http://www.stockshockmovie.com