QUESTION: Marty is the rumor true that there is huge short-covering going on that is taking the US share market higher?
ANSWER: Of course. As I have stated, our model tends to show the point of no return is in the 23000 level, not here. This rally since 2009 has been the most BEARISH rally ever in history. Think of this like the mirror image of gold. Gold has declined for 5 years and you have people screaming here we go with ever $20 rally. In the stock market, it has been exactly the opposite. Every time the market decline, they say here we go it will crash by 70-90%.
This is what I mean that the MAJORITY must always be wrong for they are the fuel that moves markets. I have been stating persistently that the Dow cannot “C R A S H” when the majority are bearish and retail participation is at historic lows (see Gallup poll).
The only real buyers have been due to the dollar, and sophisticated traders. The bulk of everyone else are BEARISH and cannot bring themselves to buy for they are still fighting the last rally in 2007 when they got caught. Therefore, the bulk of buying is short-covering – not fresh longs. This is very important. Fresh longs buying new highs turn sellers on a downturn. Short-covering does not. They may attempt to short against, but typically into a low – not highs.