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RAckerman: Bad News Helps Drive Up Stocks

By: Rick Ackerman, Rick's Picks
-- Posted Thursday, 17 April 2008 | Digg This Article | Source: GoldSeek.com

There must be quite a few more nervous shorts out there than we’d imagined. The Dow Industrials shot up 257 points yesterday, but take a look at the news that drove shares ebulliently higher: Intel earnings for the first quarter were off by 12%, and JP Morgan’s profits suffered a whopping 50% decline. For good measure, Morgan also noted that the credit crunch is likely to weigh on its business at least until 2009. It tells you how abysmally low expectations must be these days when that sort of news can touch off a headline short-squeeze on Wall Street.

Then again, considering how the earnings news was spun, who could blame bears for thinking it might not be such a bad idea to run for the hills? When Morgan weighed in on the tape, and stocks responded by going higher, we were told that “analysts” had been “expecting” the numbers to be far worse. We’ve put quotes around those two words because we have our doubts that yesterday’s short-squeeze represented some kind of measured response to specific forecasts made by human beings. (To paraphrase Butch Cassidy: “Who are those guys, anyway?”) Our gut feeling is that if Morgan had announced anything short of bankruptcy, stocks would have done more or less what they did. Which is to say, the Dow’s crazed thrust was ordained by forces beyond our understanding; and, moreover, any news short of Armageddon would have made no difference whatsoever.

12.5% from Highs

Which brings us back to the rally’s cause: nervous shorts. We’ve continually emphasized that there is almost zero buying of stocks these days by bulls, only by bears covering short positions turned menacing. But while bulls may sneer at the notion that this country is headed into a recession that will make the 1973-74 Marianas Trench look like a pothole, that doesn’t necessarily mean they are so stupid as to think stocks represent good value at these levels. To the contrary, the Dow at yesterday’s close was just 12.5% from all-time highs – fantastic, really, considering how grim the economic tidings have been lately. Some would say the stock market, in its infinite wisdom, is predicting a quick end to the recession that most official sources have yet to even acknowledge. For our part, we still think Bob Prechter will be right about the Dow trading under 1000 before the Mother of All Bear Markets has run its course.


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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com


-- Posted Thursday, 17 April 2008 | Digg This Article | Source: GoldSeek.com


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