Selling stocks is easier and more profitable for most stockbrokers than selling shorts and it creates an imbalance in the system in favor of buying pressure. It's a structural problem that leads to inflated stock prices.
Stock prices are more about psychology in the short term than they are about objective measures and so the effect of good or bad news tends to be blunted the more that it is repeated.
It's like how a plane crash with 100 dead is always front page news for weeks but 100 people die in car crashes every day with monotonous consistency to the point where it doesn't generate much general interest.
When news is novel it gets more press and interest. When it happens every day the press and general public get bad news fatigue and flip to see what Britney is doing, even if the problem is objectively worse.
The spectacular crashes of some well known businesses drew a lot of bad press in the fall. Novelty generates attention. That created an atmosphere for a sell-off.
The economic numbers this spring are more disasterous than they were in the fall but the markets are rising. Professionals shouldn't trade or encourage trading contrary to the evidence but they do it anyways and many that should be professional get sucked in to hype.
That's because Fannie Mae failing is something that everybody can understand but e.g. bad employment numbers are statistics. Like Stalin once said, one death is a tragedy, a million are a statistic. 650,000 lost jobs is a statistic. Maybe 1% of the population grasps what that means.
It may be that when the brokers run out of "dumb money" to prop up the market that it will subside on its own, but look for a few spectacular failures to trigger a further crash in the market for the wrong reasons.
I don't think that is something that you can really research, at some point it is just going to happen.
The SEC rules encouraging the cooking of books by allowing companies to choose how to valuate assets rather than following strict principles will lead to unexpected collapses.
When the culprits rely on the SEC rules as their defence, the whooshing sound you will be hearing will be the foreign capital getting sucked out of the U.S. markets as foreign money loses all confidence in the U.S.
