Rip Or Dip This Week?

The world hasn’t changed much from 3:15 pm on Friday to now but perception sure has. And perception certainly is reality,especially in the stock market. What I think will empower the bulls this week is that we were headed for the woodchipper as scripted on Friday until the Ambac rumor popped out of the woodwork courtesy of Charlie Gasparino at CNBC. The shorts were feeling emboldened as it got later in the day, and why not,it was looking like another uninspiring Friday with nary a positive catalyst to be found. As a result, they were caught leaning the wrong way in horrible fashion. I have always said that when it comes to stocks, fear is a more powerful emotion than greed and and alot of short money managers lost sleep this weekend. Forty five minutes is just not enough time to unwind short positions that have take weeks and months to procure. Does the rally mean we rally on Monday? Probably for a bit but we are still hip deep in issues. The beauty though, is that the same issues have been beaten into our sensiblities on a daily basis for months now and that in itself is what helps carve out a bottom.

The other thing that no one has mentioned yet is the possiblity of a major meltup as Thursday is the end of the month. Portfolio window dressing could drive things dramatically higher, not only because of short covering but because the hedgies will have the herd mentality and have the fear of missing the boat. We have all seen what happens to the market when this dynamic kicks in to overdrive.

The financials led the way on Friday in the lat 45 minutes of trading and the S&P 100 exploded. I believe every stock in that index reversed and closed higher with the exception of Microsoft. That is interesting to me by the way. The street really doesn’t like this Yahoo deal.

This if my first post for Trading Goddess and I would like to take this opportunity to thank her for the kind invitation to be a guest contributor. See you all soon, have a greatt week be careful and don’t forget to look both ways.

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