This is complete nonsense in my view. I wonder how long it will be before Ben and Hank enlist the military to fly blackhawk helicopters over anyone who speaks the truth about the economy, housing implosion, and the credit implosion. Because the SEC already has rules and regulations to restrict naked short selling there is no need for an emergency order. So it is obvious that this is clearly a public relations campaign to shift the blame to the stock market participants for all the problems. Perhaps Bernanke and Paulson hope that this order will scare people holding shorts in the market to cover, irrespective of whether they are naked shorts or not.  But the main purpose of this order in my opinion is to make the American public "think" that the problems with the banks are all due to actions within the stock market alone. They are attempting to re-direct the anger of the general public who have lost lots of money in their investment accounts from Washington to Wall Street. And that is simply wrong!

The general media does not understand what naked short selling is. So their coverage of this will be distorted and confusing. And the result will be exactly what Bernanke and Paulson want… make Wall Street "speculators" appear as the bad guys for everything wrong in the banks. Even those in the media who should know better are getting it wrong. In a Bloomberg article they say:

July 15 (Bloomberg) — The U.S. Securities and Exchange Commission will limit the ability of traders to bet on a drop in shares of brokerage firms, Freddie Mac and Fannie Mae as part of a crackdown on stock manipulation, the agency’s chairman said. […]

(full article here)

Notice how their opening paragraph is misleading. It says the SEC will limit the ability of traders to bet on share prices dropping. This is NOT what the emergency order is about. The SEC can’t stop people from shorting stocks, it is a perfectly LEGAL and normal part of how Wall Street has worked since the beginning. But the media is distorting the facts so the general public who does not understand the facts will put the blame of their hardships on hedge funds, traders, and anyone else who is shorting stocks in the normal fashion. Naked short selling is NOT allowed, but it still occurs. But naked short selling is not the problem nor is it the reason for the banking troubles. Washington just wants YOU to think it is.

For a complete description of naked short selling see this explanation on Wikipedia.

Now on to the market technical’s. Pick a chart, any chart. And it will most likely look as if has been through a war. The market has continued to decline even with technical indicators screaming that a bounce is due. Many technical indicators are at a point where a bounce in the market can be expected however the confidence in the economy continues to weaken further and has kept any bounce at bay. The long term outlook for the market continues to be bearish. The short term is very difficult to predict here. It is at these kinds of extremes in the technical indicators that a rapid and strong bounce can take place at any moment,  and it can also be a pre cursor to a violent and sharp sell off.

Our recommendation at this juncture is to stay on the side lines. Unless you are an experienced day trader it is safer to not try and swing trade the market at this time. Preserve your capital. We anticipate a large move coming in the broad markets soon, we just can’t say which direction it will be yet.

Technical’s and fundamentals are at war right now.