As I write this, the Dow Jones Industrial Average DJIA,  has surged more than 300 points, vaulting the benchmark index over 21,000 points for the first time. This ferocious rally, a day after President Trump’s speech to Congress, also is reflected in other indices, including the S&P 500 Index SPX,  and the Nasdaq 100 NDX.

Stock market gurus are out in full force explaining the reasons for the rally. But I have not heard the real reason from a single person.

To get to the answer, let’s start by reviewing an annotated chart of DJIA futures YMH7.  Please click here for the annotated chart.

To find out what happened today, we’d have to know how large players were positioned going into Trump’s speech, which took place after the close of the stock market. (Positioning, in this context, means aggressive short selling or buying prior to the speech.) These players figured that the Trump rally, which has stretched on for months, has been based on hope and that, unless the president gave details about plans for the economy, there would be a big selloff. They reasoned that, by looking at past speeches of presidents before Congress, the details are almost never there. So it appeared a perfect setup to short sell; in other words, to bet on a decline in share prices. According to algorithms at The Arora Report, these players built substantial short positions, as shown on the chart.

Short sellers tend to be the nervous type prone to panicking easily. They do so for good reason: In short selling, losses can be unlimitedRead more at MarketWatch


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