Doesn't anything that goes higher just feel like it is part of a giant short squeeze? Some rogue trader caught on the wrong side of an ETF bet, or some giant hedge fund capitulating on the oils, or an investment gone wrong in the rails?
Take the big biotech move higher yesterday. I didn't hear anyone say "the fundamentals are going to take hold here, with many of these stocks trading through the valuations of traditional big old pharma." What I heard was "they have to cover, don't they?" Don't they want to ring the register, with the big brother "they" being all of those omniscient ones who got short these stocks after that former hedge fund manager bragged openly about profiting from the misery of others who had to pay up for an old medicine.
You saw the short squeeze in the oil ETFs. I mean, come on, Concho (CXO) is now up 17 points in less than a week. What happened? Did many people get short ahead of the spot secondary and not get any? Or were people still shorting oil off the Goldman Sachs $30 call, the one that has marked a short-term bottom?
Or, let's be forthcoming here on this Icahn call. While Carl might ultimately be right about his famous -- some would now say infamous -- video about doom and gloom and the end of it all, the denouement of everything, it did mark an important bottom that has lasted a week now. I say marked a bottom because it was so compelling that I know a lot of people sold and a lot of others shorted, just to be in on his coat tails.
Truth be told, as my friend Matt Horween says, is this a bull market within a bear market or the end of the bear market? I have been saying that it's been a roving bear market, but that is meant to imply that there are areas being decimated that then bounce back. However, they rarely, if ever, bounce back higher than when they started. That's why it always just seems like short-covering as if there is no real reason to cover, because nothing new and good has happened.
Yes, we are getting Micron (MU)-like bottoms now, where the estimates are so low that even meeting them is enough to spur a rally. Yesterday, for example, Monsanto (MON) reported a truly horrific number. I mean a $0.19 loss when people were looking for a $0.03 loss? It "correctly" opened down three and change, but then you had to say to yourself -- as I did on "Squawk on the Street" ¿ "wait a second, this stock has come down from $120 this spring to the high $80s this fall. Does anyone think it would be a good number?" Was there anyone left in the stock who expected any sort of upside surprise?
No, instead what prevailed as a classic short-covering rally. Some people who actually might have thought that Monsanto would report a decent number, were, no doubt, freaked out by the coverage and just said, "enough is enough." But there seemed to be far more shorts than the stock could handle, and they ended up fighting over every share. That's how it could end up for the day on a truly mediocre report.
These short and cover skirmishes are happening all over the field of battle every day. It is why everyone knows it is an unhealthy playing field, because the stocks that are rocketing are the ones that people have bet and made fortunes shorting.
All I can say is that one day the shorts will have all covered and there will be few natural buyers for the stuff that has run up and yet continues to disappoint. We just aren't there yet.