Written by Rich B. Meier
TopEquityNews.com
Re-hypothecation – ever heard of it? It’s the practice of banks and brokers re-use collateral posted by clients to back their own trades and borrowings. While it’s obscure to most individual investors, the practice runs into the trillions of dollars.
It was the undoing of MF Global as they made some bad bets and were over-leveraged. With $1.2 billion of MF’s client’s assets missing, the financial press is looking into the practice and naming names; some of which have issued denials.
So what could it potentially mean for you? Think of it as margin. With the spotlight on the practice, many of the banks and brokers could rush to buy back lent securities – or in more common lingo, a short squeeze.
If this scenario plays out, you could see prices head higher. And it could be partly responsible for the NASDAQ bouncing off of its 50 day-moving-average on Friday. From a technical perspective, the index could get an additional push from the 12 and 26 day-averages slipping by the 50-day mark.
Friday’s gains also put the NASDAQ back on top of its 2nd lowest trend-line. From here, we can see the index continuing to trend up to the top end of its middle channel, around 2700. Ultimately, the NASDAQ needs to get back to its upper guardrail of 2800 to keep August’s rally on track.
The key test is will we see a close above 2750 before one below 2600? The answer is the difference between an extended bull run towards 2011 highs or a test potential test of the year’s lows.
Stock Market Trends: Re-hypo What? is an article from: 
