Are the Shorts Getting Careless?

A good hedgie contact with an excellent track just pinged me with the following:

Hey.. wait a minute... I thought that when oil drops the market would rally? Isn't that what CNBC tells us?

Today I see:

• Oil down $5
• NG down 60 cents
• Soft commodities limit down across the board (I think)
• Dollar is behaving too

My guess is that this is the final blow to the bulls... they stayed long hope.. that an oil/commodity drop would spark a rally.... and NOW WHAT?? Perhaps we see the last of them simply throw in the towel in coming days.

Here is another observation...

We have Fannie (FNM) and Freddie (FRE) collapsing and the market down only 100?? Could there be THAT much short interest in the market?? We may very well be pushing on a coiled spring here... and if so... at some point we could have a massive reflex rally. I see that VIX is spiking at the same time we are approaching 1210 on the S&P 500.

Perhaps the simultaneous intersection of $30-VIX and 1210-S&P 500 could be the spark that sets it off.

I wish I knew the answer to these questions. Shorts are fat and happy... and could be getting a bit careless.