Wonder why the market is up 25% in a single month, despite no improvement in fundamentals? Consider this interesting coincidence.
The recent huge market rally began March 10, the same day Barney Frank announced the imminent, nearly certain elimination of the short uptick rule. Berkshire Hathaway, a popular short in recent months, rose 19% that day.
Meanwhile, judging from what clients tell me, a lot of big funds lately are simply speculating on short-term momentum.
Connect these two dots: massive short covering began March 10, anticipating the end of the uptick rule. This caused a mini-rally. Big momentum investors reacted to that, and to each other, creating self-sustaining momentum.
Result: sustained rally on no fundamentals.
Not saying that’s definitely what happened, but it is a simple and plausible interpretation of events. More plausible, in fact, than an abrupt improvement in the economy or financial system.