When you get short sheeted, you eventually figure it out and remake your bed and lay in it. When you are in a market condition called a short cover, sometime you can remake your bed and lay in it. Sometimes you have to rebuild the bed.

Today's pin action had me confused as there was little volume but a real nice spike. The spike started in Europe as there was some non-explained agreement with various heads of Europe about saving the Euro and Dexia Bank. (By the way keep an eye on that deal as Denmark has taken on enough debt over this deal to make Greece look like a safe haven for cash. Also, France swallowed ton of the Dexia liabilities to make it real shaky.) Our President chimed in early in the morning saying he support the deal, even though none of the financial channels had any of the details of the deal and insiders are saying the deal is already in jeopardy.

Now there are some situations when you can have a spike on very low volume, but they are not common. The only scenario that fits is called a short squeeze or short cover. Real briefly (For more info got to the stockopedia link on the right and look up short squeeze or short cover), when an investor thinks a stock or a sector is going south, they can take several actions. One is to sell a stock short.

Here is how it works. He or she goes to Chucky Schwab and says Hey Chuck I am thinking that ABC stock selling at $100.00 a share is over bought and do for a correction. Can I borrow 1,000 shares of ABC and I will replace them later when the price drops. Chuck say Ok, but I am going to charge you interest on the value. (A margin account).

So you borrow 1,000 shares of ABC and then you immediately sell them for $100.00 and the price drops down to 80 dollars. You got out and buy 1,000 shares of ABC and return the 1,000 shares to schwab and you pocket the difference less the interest you paid to schwab. In this case $20,000 less interest.

Now let's suppose you did this transaction 5-6 weeks ago when the market was about 7% lower than it is now. You sold the shares in ABC for $100.00 a share and they are now worth $107.00. Chuck is going ask how are you doing with the shares you borrowed and by the way they are worth $107,000 now. If you are managing your losses carefully, you might be inclined to buy 1,000 shares of ABC at $107.00 to get out of the deal. That is driving the price up artificially.

Guess what happens when all the short positions get settled, the $107.00 price has no support and drops very quickly.

Because of the large amount of Short selling over the last month, the total lack of volume in the market today, today's rise on the hopes of a Euro-deal with not Euro-details could be a short cover. Because the volume was bone dry, we are still in a correction despite the 2% jump in the indexes.

A Not So Subtle Nuance 

We will leave you with this one, NUAN Nuance Communications, Inc. provides voice and language solutions for businesses and consumers worldwide. It offers dictation and transcription solutions and services that automate the input and management of medical information; and speech recognition solutions for radiology, cardiology, pathology, and related specialties that help healthcare providers dictate, edit, and sign reports without manual transcription.

We kinda tripped over this one when Russ C., golf buddy and hot dog connoisseur showed me an app on our iPhone called Siri. It was very impressive and voice based. As I played with it I noticed it kept saying powered by Nuance. When Steve Cook introduced the new iPhone to little fan fare, one of the selling points was a new version of Siri. Then the next day when I used Siri I got a message that Siri was going to its new home, The new iPhone and would no longer be available.

When I heard that Apple booked 1 million new iPhone 4Ss in the first twenty four hours, it got me thinking about Siri and then Nuance. IBD did a mention of NUAN this morning and we just spent the last forty minutes doing some interesting homework. This is definitely going on my watch closely list and we are going to do more digging tomorrow night. (SEC Filings-even I can't do that this late at night.) I have a feeling this stock as it's a fast grower, has little debt, is forming an interesting little base on its chart which could indicate a break out. If the market were not in a correction we think we'd be buying little chunks of it to establish a position. DO YOUR HOMEWORK, but remember you heard it here.

Voice recognition and voice priority software is going to be the next big thing. It looks like NUAN is perfectly positioned to be a player.