Slapping Down the Short Sellers

You should know the drill by now… New all-time highs for the Dow. Same goes for the S&P 500. Friday, July 12th, 2013     Slapping Down the Short Sellers   A "good vibes" contagion It's all short covering -- or is it? Plus: Dow 20,000: A reader's prediction…   Greg Guenthner coming to you from Baltimore, MD... Greg Guenthner You should know the drill by now… New all-time highs for the Dow. Same goes for the S&P 500. The good vibes have even spread around the globe. The Stoxx Europe 600 index is up more than 3% on the week. The Nikkei is up modestly today. Yet over the past four weeks, the Japanese index has gained nearly 10% after nearly melting down in late May. Make no mistake about it— this huge move higher we are experiencing is broad and strong. Not two weeks ago, the number of stocks trending above their respective 50-day moving averages had plummeted to the lowest level we've seen since November 2012. After a breakneck turnaround, more than 80% of S&P listed names have snapped back above their respective 50-day moving averages. There's been talk that the Fed's pronouncements this week have sparked a massive short covering rally—which in turn has helped ratchet up the gains. That makes sense. A lot of people (including me) were expecting the market to correct further before finding its footing. Yet according to Bespoke Investment Group, stocks with high levels of short interest aren't leading the market: "[T]he 150 stocks with the highest short interest are up an average of 0.96%, which is only slightly ahead of the average return for all 1500 stocks in the index (0.95%). Additionally, the three deciles with the highest short interest are up an average of 0.85% today, while the three deciles of stocks with the lowest short interest are up 1.05%. These kind of returns hardly indicate that shorts are scrambling to cover." If the shorts are still clinging to their positions, it would not surprise me to see an actual broad-market short squeeze if the market provides a tight consolidation before moving higher. If we've learned anything at all this year, it's that there is an incredibly strong bid under this market. Anytime a potential short selling opportunity has arrived (outside of the mining sector) stocks have roared higher. You'll probably hear a lot of talk about market tops and short selling opportunities in the coming days. But from what I've seen, they are to be ignored. Short this market at your own risk. Right now, it looks like a great way to dismember your brokerage account…     Rude Numbers Targets, Predictions and Wild Guesses   $1,270 is where you'll find gold futures this morning. The yellow metal slipped about $10 overnight. $117 billion is the surplus that the US Treasury just ran in June. That's a big turnaround from a $60 billion deficit one year ago. Year-to-date, the deficit is currently $510 billion, 44% less than last year. 400 Tesla Model S sedans are being pumped out of the company's Fremont factory every week. According to Elon Musk, increases in demand and production skills could drive that rate up to 800 a week in 2014. $299 buys one share of Amazon this morning. The stock reached a milestone high of $300 per share intraday, as the company continues to gain traction in a variety of growth markets. 1,671 marks the spot for S&P futures—just an inch higher than yesterday's close. If the market holds in the green today, we'll have seven straight days of gains…     Rude Trends When to Buy... When to Sell   "Look back at my email to you on June 24," brags a reader. "The one that you called too optimistic in a reply in your column a few days later." Oh boy. Here we go… "I said then the Dow had made a low and would continue the upward move toward a bright new future... Keep in mind my prediction for a stronger dollar, a substantial drop in oil prices and gold below 1,200 by the end of this year. I am just an amateur but it is all plain to me— including my call for the Dow to reach 20,000 and higher during this move to that bright future." You're going to pull a muscle patting yourself on the back so much. Don't mistake my recent calls for a short-term correction to be anything more than they were. The primary trend is still higher. I never insisted that we were in for a devastating move lower. Also, I don't understand why many in the ultra-bullish crowd feel the need to kick and scream at every dip or correction. That's where the opportunities are! I'd much rather see an orderly pullback or three than an out-of-control move higher. We all know what happens when markets go parabolic. You might be right now, but what if the market turns against you? Are you willing to change your mind? If not, you could be in for a nasty reality check… [Ed. Note: Send your feedback here: rude@agorafinancial.com - and follow me on Twitter: @GregGuenthner]     Ignore At Your Own Peril Today's Must Read Links   ATTENTION: All Overweight, Beer-Bellied Market Watchers Have you heard of the "Hollywood Contract" strategy? The Think Small Secret To Getting Rich     BE SURE TO ADD dr@dailyreckoning.com to your address book.       Additional Articles & Commentary:         To end The Daily Reckoning's Rude Awakening e-mail subscription and associated external offers sent from The Daily Reckoning and The Rude Awakening, click here to unsubscribe. Please Note: If you unsubscribe from The Rude Awakening, you will also be unsubscribed from The Daily Reckoning. The Daily Reckoning's Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Agora Financial delivering daily email issues and advertisements. Please read our Privacy Statement. 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