It seems that the popular kids on the block are no longer popular.  There seems to be a shifting of favoritism toward other industries such as healthcare and financial stocks in the last two days.  This seems to be in the determent of commodity stocks such as energy and metal names.  My entry into CHK was ill timed as gas prices dropped the most it ever has bring most oil and energy related stocks down to break even for the year.  We have to admit that the trade is over and it’s time to migrate out of the names because the bigger mass exodus occurs.  Every institution is heavily weighted in most of these names and the exits will be huge as some of these names break support levels at capitulation proportions.  With growing sentiment of a slowing global economy (I would try not to dispute this because look at all the global markets – China is now the worse performing market just behind Vietnam – both of which were high flyers a mere eight months ago), the demand for commodities will slow but definitely it’s a long term trade if you are in it.  But it’s better to say safe until the smoke clears.  Nucor came out with earnings and they were forecasting some negative numbers.  This is perhaps a forewarning because expectations are high for them while expectations for financials are rather low so most will beat.

The restriction of “naked” shorting on financials will allow the financials to move up as the restriction starts on Monday so most funds will have to unwind these naked shorts (which means shorts that have no stock basis or they haven’t borrowed the stock to sell which can generate artificial selling because they are selling more stock than available and trust me traders will attempt to sell anything they can into a bear market).  So as the 19 financials are off the list, short covering will prop the market for the short term, at least till Monday.  So rally rally rally.  Much of the rally may almost be over but the bears are at least on edge until the next problems arise.

Market sentiment is overwhelmingly positive at this time because even with the negative inflation data, the market rose yesterday.  So it’s clear, the short trade is temporary over.  But this is not the bottom.