Latest from Rosie

Everyone seems to believe that being long the market is the contrarian trade when in fact it is the crowded trade. Sentiment measures have moved to near-extreme bearish levels. There are numerous divergences. The shorts have covered — short interest plunged 5.2% on the Nasdaq in the first half of October and by 1.8% on the NYSE.

As was the case in the summer and fall of 2007 when the market was giddy over Fed cuts to the discount rate, the financials have not ratified the latest up-leg in the major averages — the group is often a bellwether leading indicator and is still 15% below the nearby April highs. Oh yes, and now the banks are resorting to padding their earnings numbers by drawing down their bad loan reserves — likely prematurely too.