If everyone is bearish...5/27/2014


Despite seemingly everyone involved in Wall Street seeing rates rising, they have fallen recently.  The rumor on The Street is that all the hedge fund gurus took short positions regarding rates, betting that they would fall.  BUT when they did not fall, these gurus had to unwind their positions which forced rates lower.  So you see, given that fact that everyone "knew" rates where going higher, they, in fact, went lower because of the workings of the markets...supply and demand...buyers and sellers.

Well, right now I wonder if the same thing is happening in the stock market.  Turn on Bloomberg or CNBC and listen...over the last few months it seems like everyone is predicting a pullback in the markets (including yours truly).  BUT if everyone is bearish and positioning their portfolios accordingly, who's left to sell and push the markets lower on bad news?  No one.  

But if good news hits the market and everyone is positioned for a pullback, what happens then?  Well, the market should shoot higher as these negative trades need to be reversed.

Something to think about.