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Short Squeeze Continues?

Stocks have rallied since Europe has closed...markets in the U.S.clearly want to go higher: it feels like we are in the midst of a short squeeze because there has been no pullback in the last seven sessions.

True, earnings are coming, but it feels a tad early for a runup into earnings. If we can trade in a tight range for a few days, we will work off the overbought situation and may then be able to move higher.

What's up with Europe? Stocks in peripheral countries like Italy, Portugal, Greece and Spain were down about 3 percent today. I noted yesterday that U.S. markets had little reaction to the Moody's downgrade of Portugal's debt to junk status because the debt was already trading like junk...this downgrade happened after Europe closed.

So why did Europe react negatively today? I am told the official rating change to junk forced some European funds to sell.

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