Short Covering Is The New Short Selling

During the worst days of the market decline, a number of the more optimistic type chalked it all up to the evil short sellers. It’s the shorts, it’s all those damn shorts making the market down!

Of course, vilifying the faceless short sellers has a long tradition, but it’s almost always totally bunk. Saying the market is “wrong” or irrational is for fools and scoundrels.

Alas, the tables have turned. Hardcore bears and net-short hedge funds have been getting reamed over the past six weeks, and once again, the market moves are totally irrational. It’s all the short coverers, says Karl Denninger! There’s no rally, it’s just a pure fiction. Check out any message board, like this one for the Ultrashort Financial ETF, and you’ll find folks bemoaning this ongoing short-covering rally and of course Ben Bernanke’s mythical plunge-protection fund that must be intervening in the markets.

As is always the case, people whose view of the market don’t conform with the latest movements, see dark shadows or at least mass irrationality around every corner. And somehow it always comes back to short sellers, no matter which way the market is moving.

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