Friday was a day of whipsaws. The market started out with sellers furiously attacking support levels as the credit crunch affecting the financials produced fears that we were fast approaching a 1987-like crash. By mid morning, however, the Fed stepped in and injected several billion dollars into the economy to calm investor fears and add much-needed liquidity. This caused a quick jump, but sellers were still determined.
Later in the day, however, more money was injected and this time it took hold, pushing index prices and financial stocks higher into the close causing a goal-line stand on the SPY and stemming the outflow on the leading financial sector.
Even so, a huge amount of traders made bets on the bearish side last week shorting Friday's bounce. With expiration this week the short positions are the positions most likely to suffer maximum pain. With money stream figures now diverging bullishly in the financial groups, we see a potential for a strong short squeeze.
Keep in mind that this assumes all things remain equal. If another hedge fund crashes this week, shorts may see a breath of new life in their positions.
No comments:
Post a Comment