Catalyst For The Rally?

• December 27, 2001
• Jon Najarian

Short
sellers have been betting bigger and losing bigger, according to figures released
by the Nasdaq. Short-selling positions not yet closed out were up 0.7% to a
record 4,206,146,735 shares in the month. Also according to the Nasdaq’s
release, the negative effect on short sellers’ portfolios has been a drop in
equity of approximately 7.2% since November.

Apparently, some aggressive shorts have been trying to guess which stocks will be the
subject of tax-loss selling and shorting into those stocks, just as shorts pour
through SEC filings to see when lock-ups of insiders are coming due. In both
examples, the shorts anticipate negative price action and hope to ride that wave
for several points to the downside, thus reaping a quick windfall. When it
works, the strategy is like printing money. When it doesn’t work, like thus far
in this crazy fourth quarter, the shorts can contribute to the rally by their
short-covering action.

Thus
far this morning, stocks, particularly retailers, were adding to gains from
yesterday’s session. Even some of the laggards, such as Gap
Stores
(
GPS |
Quote |
Chart |
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PowerRating) and Federated
Department Stores
(
FD |
Quote |
Chart |
News |
PowerRating) are experiencing positive money flows.
Outside the retail arena, Sun Microsystems
(
SUNW |
Quote |
Chart |
News |
PowerRating)
has been among the most active Nasdaq issues since AG Edwards upgraded the
technology company on Monday.

Our
outrageous prediction of the day award goes to Saudi Oil Minister Ali Naimi, who
declared there is a 100% chance that OPEC will cut production Jan. 1. The
much-heralded cut, rumored to be as much as 1.5 million barrels a day (6.5%), is
purported to last for six months. Anticipation of such an occurrence sent oil
prices skyrocketing yesterday. However, given the cheating that goes on amongst
the cartel and questionable sincerity of non-OPEC members, its doubtful that
crude will advance much past yesterday’s NYMEX high of $21.50

Be sure to tune in to our
year-end wrap on “Doctor J & the Traders” on www.webfn.com
at 4:30 pm CT. My guests will be Tom Haugh
of PTI Securities,
Greg Temel of BeyondtheBull.com,
Larry Parkhill of Philes
Corporation and by telephone, back from the grave, back by popular demand, Goran
Yordanoff! Goran makes his first appearance in over a month, as
the master of disaster, the Pied Piper of shorts and baddest bear in the air returns to the
airwaves!