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Monday, May 4, 2009

Melt Up

This morning I posted on the reversal in the dollar index, and how the market shot out of the gate. The collapse continued as the market rallied. Is this Bernanke's doing? Oil hit $54 for the first time in forever, not surprisingly.

This is the last 10 days of XLF. Not only did this break through resistance intraday, but look at the last 15 minute candle. That has the look of panic buying.

The SPX made mincemeat of 888 very early, then hit resistnce at 900, before lowing through it in the last 15 minutes. Volume was average, but there was vitually no selling today. The 200dma is now in sight, and we just might get there.

The Nasdaq composite is through it's 200dma. It has gone almost straight up since the last pullback.

What is it fueling this rally? I took a look at the short interest (from Finviz, as of Friday. I don't know how often they update it). Here are the stocks that have more than 25% of the float held short. Many of them are on the relative strength list, which would figure that the stocks that have moved up would be the best short candidates, but they also become good candidates for a short squeeze.

This rally has looked unsustainable for a couple of weeks now, but it keeps going up. Why? I can't give a definitive answer, but with the government taking control of Chrysler, GM, AIG, and dictating terms to BAC, JPM, and WFC, we are in uncharted territory. Even during the Great Depression we did not get this much intervention in the economy. If Bernanke is successful in completely trashing the value of the dollar, I expect stocks to scream higher (along with commodities), and we'll all have a lot more, but worth less, money.

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