"Everyone" is bearish! Where are the bulls? They're cowering. I don't buy into this. The market is irrational. And now the irrational bearishness is setting up the market for a significant rally.
Remember last week when the muni market didn't have bids, and the auction rate municipals couldn't reset? The muni market ceased to function, and anomalies existed everywhere. The 5 year treasury notes were selling at 2.5%, and buyers swarmed to buy the issue. But you could buy AAA, 5 year pre-refunded muni's 3.5%. (These bonds are backed by Treasuries in escrow.) And unlike treasuries, they are tax exempt. Depending on your tax bracket, you were getting a tax equivalent yield almost double what treasuries were paying!
This week, the muni buyers showed up. What changed? Maybe it was just the end of another forced liquidation of a hedge fund. Or maybe it was the prices. Because when prices get so cheap, markets, and psychology can change very quickly.
Tomorrow, IBM has it's tout fest at analyst day. And Apple will reveal a bit of their strategy for the iPhone corporate market. Tech stocks are so cheap, that even this hated group should get a bounce, helped by the giddy news flow expected at these events.
Just like the municipal market did.
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