The Short Squeeze Continues

Late Friday we saw a stampede of buying. Many strategists said this was likely a short-covering rally, as traders who were short the market moved quickly to lock in profits. Well, this morning the buying panic continues as the Dow surges +300 points in the first hour of trading.

And again, there was more negative news reports before the open this morning, but the market is shrugging them off and acting positively. 3M lowered guidance for next year as announced job cuts; Dow Chemical also said it will layoff 11% of its global workforce; and MetLife (MET) issued downside guidance as well. But both DOW and MET stocks are trading higher this morning.

President-elect Obama said over the weekend that he is going to push for a massive fiscal stimulus plan. Several other countries over the weekend are considering more stimulus plans, and that helped the Asian markets enjoy strong gains of +5-8%. Europe is also up big this morning.

The dollar is lower vs. the Euro, which is helping commodities. Gold is up +4%, and oil is rallying to $44. The energy and materials stocks are bouncing sharply, and are leading the market so far.

The 10-year yield is a bit higher to 2.72%. And the VIX is another -3% lower to 58.15. More pieces of the puzzle appear to be falling into place, one step at a time.

long TBT