The Market: All Bull and No Bear?

Market short interest is at an 2 year low and I find that VERY INTERESTING in it's ramifications.

For weeks I've been referring to the negative fundamental and technical picture of both the economy and markets, especially with regard to the H&S technical formation portending a dramatic fall in the indices. YET, there seems to be very little confidence amongst the bears in taking advantage of that scenario.

Within that link it refers to Barton Biggs, but what it did not state is that he JUST mentioned this week that he is 75% LONG. Now, Mr. Biggs is NO FOOL. He runs a multi-billion dollar hedge fund, Traxis Partners. He's made some good calls in the past, receiving considerable praise. But he missed the recession in 2008 and lost 10% based upon that call.

But given that within the past two weeks he's made a MAJOR change in his market outlook, going from being a seller to a buyer, that's a serious shift in sentiment that cannot be ignored. What is it that he sees that the rest of the market doesn't?

We've received nothing but continuing bad economic news. Yes.. corporate profits have been decent, but the market is a forward predictor of economic activity and should be following the negative data we're seeing. Consumer Confidence is at a near all-time low, while Durable Goods data came in negative -1%, when it was expected to be positive. We don't have anymore government stimulus.

So if there is a major lack of short interest, WHAT IS DRIVING THIS MARKET UPWARD?? It certainly isn't a "short squeeze", which is normally the "fuel" for a major market upside reversal. The short positions just aren't out there. And it's not "smart money", because the volume doesn't reflect major commitments on their part (as Christian from Perfect Stock Alerts contends that it's all "retail" buying). Or is "smart money" actually involved? That's where Mr. Biggs' opinion is so important.. Barton Biggs IS SMART MONEY, although admittedly sometimes wrong. But he could also just be "talking his book" and looking to sell his long holdings post-earnings and possibly ready for a market downturn.

So with those negative technical and economic data, why isn't everyone, and their grandmothers, short this market? And what is driving this market upward? There has been constant rumours over a "Plunge Protection Team" (President's Working Group on Markets) efforts to avoid market crashes. Could it be that this "entity" has been coordinating the "HFT computers" and "black boxes" to prevent that H&S formation from shaving 20% off the markets?

Could it be that "smart money" recognizes that the "fix is in" and are unwilling to bet against it? So they have no choice but to "go long".

Were I the President of the USA, recognizing that I don't want to go down in history as the President who ushered in the second "Great Depression", I would probably authorize possible means to keep those markets from going down, especially when it was apparent there is no further appetite for another trillion dollar (wasted) stimulus.

All I can say is that we're currently looking at serious "gap-ups" in the market that need to be filled. But as we saw last spring, it could take 5 months (January to May "Flash Crash") to fill those gaps and that could result in serious pain for anyone foolish enough to go bearish..

But THEN AGAIN, without the existence of those short positions, it's hard to quantify exactly what is going to continue fueling this rally.

Hopefully, the "PPT" will be able to stave off a major market crash (I certainly don't want one), instead putting us in a long-term, range bound, trader's market (which I would love) until economic data is stronger.

Scrutinizer