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BEHIND THE MONEY: Why Ask Why, Just Try A Small 'Buy'

Traders on the show and elsewhere are starting to test the waters with some nimble buy positions. They are doing this more on feeling, rather than on any tangible results in front of them. As others join them, there could be a short-term rally.

FM trader Jeff Macke points out Electronic Arts' inexplicable rally today in the face of brutal results. Either the stock is putting in a bottom or the shorts are running for cover, says Macke. (You can read more of his thoughts on Minyanville or by clicking here.) Like Electronic Arts, the overall market's strength this week in the face of brutal economic and earnings news could signal the worst is finally priced in.

Art Cashin, market guru at UBS, wrote today in his widely-admired morning note that there is chatter building on the NYSE floor that a sharp rally may be ahead.


(Check out Cashin's interview on CNBC at left.)

If that's not good enough for you and you really need a reason why, you'll have to look away from the stock market for an answer.

"Environmental indicators like widening TIPS spreads, and narrowing swap and corporate bond spreads, suggest the market is starting to price in an unfreezing of the credit markets and an eventual economic rebound," says John Kosar, director of research at Asbury Research and a technical analyst I've followed for a while. Kosar, who will be on FM tonight, is starting to get bullish.

Along with the credit markets, take a look at copper. The so-called economist of the commodities world is up about 8 percent the last two days, indicating a possible bottom in global economic sentiment.

Lastly, look to the bond market. It appears folks are finally fed up with the low yields in those securities and rotating back into stocks.

Here's the iShares Treasury Bond Fund vs. the S&P 500 over the last five days:



Add these up and you've got the potential for a rally soon. How soon? In this column last week, I hinted that it would come by Valentine's Day. Going by the latest chatter, it could come sooner if Washington gets out of the way earlier than expected and let's the markets work.

A WORD OF CAUTION:
If you are not able to follow your trade very closely and bail out at a moment's notice if the trend turns against you, then you should follow the advice that Beeradvocate.com has for the classic Bud Dry, whose slogan I borrowed for my headline today: "D+...AVOID."


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