By: Doug Noland | Fri, Jan 13, 2012
The start of a new market year is, undoubtedly, analytically intriguing. One wouldn't think that the calendar should have such impact. Yet January arrives with a clean performance slate and an opportunity for new, perhaps not as unsullied, market dynamics. What's the new game? The previous year's underperformers can rather abruptly be transformed into darlings of the New Year (especially if those stocks have large short positions). The general market also tends to benefit from strong seasonal inflows. And if stocks can charge out of the blocks briskly, a plethora of bullish news and analysis is sure to follow.
Such a fluid backdrop is conducive to abrupt changes in analytical focus - a new prevailing "analytical regime" in a capricious marketplace. Last year's now stale worries are easily dismissed, as a confluence of more constructive market trading action and news flow supports a major boost to bullish market sentiment. A short squeeze (buying to reverse short positions) - in positions that tended to be consistent with prior market focus/worries - works wonders in bolstering the perception of a more optimistic analytical outlook and diminished risk profile throughout the marketplace.
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