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The Big Short (Squeeze)

October 12, 2011

Today marks the seventh straight day of the great short squeeze of 2011. With the Dow off 17% from its seasonal highs, the squeeze began on October 3rd. I anticipate the squeeze to end tomorrow, as we are approaching the upper resistance level. We’ve been within the 10.6-11.6k range for two months now, waiting for the first pin to drop. The first pin we are waiting on is the European Sovereign Debt Crisis (ESDC). When the first pin drops, it will drop hard. The markets are jittery. Volatility is at 2008 levels. Unemployment is at 9.1% but realistically, it’s much higher.

As I write this, the Dow is up 1.66% and nearly 10% off it’s lows from one week ago. Riddle me this: did the US economy grow exports 10+% in the last week? No. Is our GDP up 10% in the last week? No. Is there any material reason for the growth? Not that I can think of. This reeks of a superficial short squeeze before the next round of shorting begins later this week.

Imagine the shape of a ski jump, as seen in profile, represents a chart of the market from July 2011 until January 2012. Where do you think we are right now? Hint: not at the top of the mountain, and currently going up…only one possible spot. The economic gravity of the European debt crisis, US unemployment, and congressional intransigence is taking hold, will make sure that our skis find the snow again in the coming weeks, and when we land, it’s much more likely to be a yard-sale crash than smooth landing.

Ok, that’s all for today’s rant. Sprint is bouncing back nicely from Monday’s lows (up 11%)…still waiting on those impressive iPhone pre-order numbers. I will be holding confidently until at least Friday (the 14th) when the iPhone 4s goes on sale for real.

We're not at the top, and our economy is not a professional ski jumper. Tharr be rough landings ahead!!!

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