Why do I say shorts added so much to today's big advance?

I said earlier that I believed that the big advance in the markets today was fueled by the short covering leading into tomorrow. There is a wide range of "what if" scenarios for tomorrow. What if they cut, what if they don't, what if they leave rates as is, what if they don't talk about the credit problems, etc... etc..

No one has a handle on what the FOMC will do and what the results will be. Only those taking big risks are trading long or short before going into the FOMC announcement tomorrow. The amount of shorts in the financial sectors has been HUGE. If the FOMC does something tomorrow that restores confidence to the financial markets then the shorts would be losing some of their gains because prices will run up even quicker because money on the long side would be pouring in on top of the short covering and climbing all over each other to get their shorts up. So they cover today and reduce their risk.

Look at the chart I created tonight and you will see that the three biggest movers and contributors to the market advance today is from Brokers, Banks, and other Financials. And with those sectors having the most shorts those shorts being covered today was the biggest contributor to the market advance today.

We can't view this market advance as the turning point. While it makes people "feel" good to see the market advance today there are more things that need to happen before the market regains enough health to advance on its own under normal buying and selling. Tomorrow after the FOMC meeting we will have a better idea of where the markets will go. Some of the talking heads say even if the FOMC were to cut the rate the market will rally and then fall even harder later. Almost like a you can't win no matter what scenario. We'll see tomorrow.

Tomorrow is the "Super Bowl" and everybody is making their wagers and placing their bets. Who will win the FOMC superbowl? I don't know, lets just hope we don't have any "wardrobe malfunctions" during the FOMC meeting!