Here’s some good news. Last night we spoke with some experienced traders who make their living watching the ticker on the floor of the New York Stock Exchange. They think that we’re in for a major rally sometime before the end of year. So many investors have gone to cash, we were told by guys standing in a lower Manhattan watering hole, that it would not take much to drive the major indexes upward if a few prop trading desks or hedge funds started going long again. They expect it to happen in the next few weeks as a few funds attempt to get in before the others, moving cash back into equities before the end of year.
But here’s the bad news. It won’t last. They believe that a wretched Christmas shopping season combined with bad news from around the world will send stocks right back down. What’s more, continued doubts about the solvency of financial institutions saps market confidence. Many of the old guys on the floor are convinced that the only sustainable strategy is “sell the rally.”