Monday, June 08, 2009

Stocks Reverse After Selling Off

The Dow was down as much as 130 points today then suddenly reversed and closed even for the day. It's not clear why. Some traders said shorts began covering aggressively in the final hour. Others credited comments by economist Paul Krugman. Bloomberg reported that in a talk delivered at the London School of Economics Krugman predicted the recession would end by September.

I'm hearing more and more talk that the market has rallied too far too quickly. Many investors (including myself) have been expecting a near-term sell-off. Yet every time stocks start selling off, buyers jump right back in and push them back up again. Since I'm long, I'm not complaining. However, I still see enough problems in the economy to worry me. As of yet, I haven't seen anything that justifies a 35% rally in just three months.