Thursday, August 11, 2011

The best day in the markets since you last saw happy traders (on Tuesday!)

The market continues to act in very strange ways. A slight (and I mean slight) outperformance on the number of new jobless claims started the rally but it was really lit on fire when news broke that the EU was going to ban short-selling across Europe.

Here we go again. This can create a quick pop because some thinks this removes speculation from the market. Unfortunately, it has been proven time and time again that what removing short sellers really does is create market imbalances.

If someone is worried that stock XYZ is in trouble they might want to sell it. In a normal market after a stock declines, some short sellers will step in and buy the stock to close their positions. This provides natural demand for a stock that is often desperate for buyers. Without short sellers in the market to buy, you can create a vacuum in the market which often leads to massive downdrafts in stocks. Again, this makes for good headlines but bad policy.

After the US market closed the EU announced they couldn't come to an agreement on banning short selling. Not to be deterred, Italy, Spain, France and Belgium said they were going ahead with their own bans. In a market that has gone basically nowhere for 13 years you have to be able to make money going up and coming down.

The Japanese slashed their GDP forecasts and that's taken some of the wind out of the global stock explosion we had today. However, I'm sure this will changed direction 6 times between now and 9am tomorrow.

Wish me luck on Saturday as I try to survive the NYC Warrior Dash at Windham, NY.

Check out the complete race map with interesting obstacles like the Deadman's Drop and The Warrior Roast.

Finally, a little comic relief in a crazy week. Ron Swanson on Birthdays.

I think I'm going to dress up as Ron Swanson for Halloween :)


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