Stock Market Enjoys Explosive Rally, but...

U.S. Stocks posted 3% plus gains on Thursday. Before the open, China indicated it would be selling any European debt or Euros, and reports also indicated that economic growth in China remains very strong. I am not real sure that was the main reason for this rally though. Maybe part of the reason was that BP is encouraged by its efforts to plug the oil gusher in the Gulf. Certainly, the economic data out today did not support this strong of a move, since 1st quarter GDP was revised lower and initial jobless claims were still at the 460,000 level.

However, what I see is more of a short squeeze. After yesterday's trading, where the market opened higher and closed lower, you can bet that some short sellers added to positions. When the market opened substantially higher this morning, the shorts were caught with their pants down, and by the end of the day, it was a bloodbath for them. But, volume was very light, so investors did not make big bets today. In fact, the volume was about 60% of what it was last Friday when the market bounced off support.

With this in mind, we need more evidence that this is not just a case of a short squeeze. I will be surprised if we get it tomorrow due to the holiday. Maybe next week when the traders return from the Hamptons.

Scott Cole
Kungfutrader.com

U.S. Stocks Set to Plunge at Open

U.S. stock markets are indicated over 2% lower this morning on concerns that North Korea is flexing its muscles in the east and fears that Europe is not getting its financial house in order. While North Korea is likely just playing games again, the 3-month LIBOR has been spiking higher in the last couple weeks, and is presently trading at 13 month highs. The S&P 500 looks to be breaking through more important levels on the downside this morning, which suggests there is more downside to come.

So, is this a correction in a new bull market dating to last year, or the resumption of a secular Bear Market that began in 2000? I believe it is the latter, which does not bode well for the economy.

Scott Cole
www.bestdaytradingstocks.com