Brutal Short Covering Massacre Sends Market Soaring Just In Time For NYSE Shorts To Hit 2011 Highs

Tyler Durden's picture

With market volume below abysmal levels, and with market breadth at the highest in what appears ever, many are wondering how it is possible that the S&P could move by about 70 points in one week. Simple. As the chart below shows, NYSE short interest for the week ended June 15 was the highest in 2011, at 13.5 billion shares, a jump of 333 million share in two weeks, which certainly persisted into the second half of the month, just in time for the market to realize that with QE2 ending, and nobody left to buy bonds, rates have nowhere to go but up. The net result is one of the most epic short squeezes in recent history, coupled with one of the most rapid moves out of bonds and into equities, and if judging by the 5 Year bond, the most rapid ever. What the message from all of this is, aside from the fact that higher interest rates are supposed to somehow be better for the economy, is that the entire market now has adopted a HFT modus operandi, where nobody even bothers to discount, and all the action is reactive. We are not sure about readers, but the fact that the market has lost its most fundamental feature - discounting - is just a little troublesome, if not surprising. Such is life under centrally planned capital markets.

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lolmao500's picture

And gold/silver getting wiped out.

MrBoompi's picture

Gold and silver getting wiped out?

Last time I looked I hadn't lost one milligram!!!

Pinktip's picture

DOW is moving tick for tick inversley with USD.......02c

coppertop's picture

They make excellent door stops

HungrySeagull's picture

Me neither. In fact the lower pricing makes for another big buying spree.

Now July 15th at close will be a total cremation of Paper gold and silver.

JW n FL's picture

The last time I checked there were monster boxes laying around all over my office floor (home office floor).. I gave up trying to stick everything in the safe.. so unless you know something I dont I would assume it is still laying there.

HungrySeagull's picture

Working on my first monster, one coin at a time. Don't wish to run into the 10K and above reporting to IRS at this time.

Once the first 500 is sold, I will grab the Monster the same day.

He_Who Carried The Sun's picture

This does not make sense as Monsieur Bernank pointed out that the FED will remain the greatest buyer of Treasuries as they announced another 300 billion package on June 27 i.e. QE3.

SMG's picture

Alot of paid trolls on here today.   For some reason Zero Hedge is being targeted more than usual.  There's always trolls on here, but for some reason they seem more active with this latest move in the equity market.   I wonder why they are trying to ratchet up the psychological pressure in the last few days.

Zero Hedge is a great site, and is more about truth than any other financial site on the internet.  While the equity market is going up,  I don't think anyone could say any of the markets right now are about truth.

All the Tylers are doing a great job giving us the truth as best they can.  They are not perfect and I am sure have made many enemies who seek revenge.  Thank You for your efforts!

homersimpson's picture

Yea it's sure getting wiped out *rolls eyes* Trolls speak for "I was short silver/gold and I lost my left nut in the last year."

$1500 and $3x gold/siver prices.. whoo.. some wipeout.. considering where they were at a year ago (or less).

RobotTrader's picture

Tyler, post a chart of the compression trade, seems like it is way out of whack right now.

Clowns on Acid's picture

When there are negative real interest rates in US, then the concept of "discounting" gets skewed, indeed perhaps reversed.

Centrally planned, effectively priced controlled (interest rates) economies never report an inflation problem until it is too late. Alternatively shortages create socio-economic violence.

Thanks Obama and your pack of left wing facsist jackals !  

NotApplicable's picture

Well, who really needs to discount when The Bernank is gonna monetize every financial asset at par anyway?

Of course, he can't really stop the downward flow through Exeter's Pyramid, let alone reverse it, but he's damn sure gonna try. After all, Greenspan claimed to have done it when he stated that they had fiat behaving like gold (of course he never mentioned how, or how well).

pat53's picture

Shorting is a losers game. Da Boyz have all the same info, when they see shorts piling in they jam the market higher and obliterate them, over and over....gotta love it  LOL

Bananamerican's picture

don't junk Pat...

It boggles my mind how many ZH'ers still show up crying in their short beer after 3 YEARS of outright manipulation! W T F R U Doing!?

From comments below:

"Look, I'm not bitching. I was the chump that somehow thought that once QEII ended the markets would start to act like free markets. I admit that I am a sucker. But I'll say this, I'm about as depressed as I have been in years. First for allowing myself to be the pigeon, second, for the massive loss I took...."

homersimpson's picture

Yea I'm sure it was for most of 2008.. Going long is a losers game, because the loss bulltards will take is greater than any gain they'll get..

No bulltard can sell their worthless stock faster than a computer.

SheepDog-One's picture

Theyre piling out of bonds into equities? That is the dumbest thing Ive ever heard....bubble jumpers will get creamed! How the hell are you going to jump INTO equities which only have been supported by massive QE, right when QE ends? That cant be whats going on, I dont believe it. But I do believe 'full retard' is in the rear view mirror at this point, whatever is worse than 'full retard' I really dont want to see.

A_MacLaren's picture


Think about the relative size of the bond market versus the equity market.  It doesn't take much of a move out of bonds and into equities to slam equities upwards.  Yields have spiked and bond prices are plummeting over the last 5 days. 

Who wants to hold bonds that are going to get massacred as yields soar without Ben's POMOs and Chinese buyers?

The money has to move somewhere.  Its not going into commodities, whether you believe it should or not.

Think about it.

SheepDog-One's picture

I am thinking about it, and having a real hard time believing this line that bond dorks are selling bonds due to worry, and piling into 100 P/E stocks at a damn near QUADRUPLE the end of QE? If that makes any sense to anyone, then good luck to em.

groovin123's picture

Never underestimate the replacement power of equities within an inflationary spiral.


It is what it is, <shrug>.



whstlblwr's picture

Or never underestimate power of threat of RP presidency. Can imagine both R and Ds don't want market down. RP easier then. I bet June's down market give RP more votes in poll, all scared shitless. Even Jon Stewart ignore Ron Paul as candidate.

Here is link of what happen in trading room. Easy to see how could be lots short for squeeze. And if Obama want higher market he gets.

baby_BLYTHE's picture

Larry LeiBowitz, John Steward's brother, is president of the NYSE.

John Stewart is a cheerleader for the status quo establishment!

snowball777's picture

Which you can sell for? A fistful of hyperinflated fiat currency!


Havana White's picture

Retirement accounts with multiple choice.  'Water seems okay in stocks again.  I'm thinking we move about half from the bond fund into the balanced fund."  "Smart, honey.  Yeah, do it."

The Fonz's picture

I agree S.Dog, we have been getting fooled about flows a lot lately. According to a article Buzzsaw posted it looks like businesses have been doing stock buybacks to the toon of about 2 billion a day as well, if I understood correctly. I cannot sort out where this money is coming from and going to. I did however get destroyed going short, it looks like I am out of the fight for a while.

banksterhater's picture

good point, so a blowoff top is in the cards, .02

Lone Mad Minute Medic's picture

And ZH has played it's part in setting the table for the short squeeze.

SheepDog-One's picture

I dont believe now, and never did believe that short squeezes have powered up the bubble equities 40%+. And even if that was true, then its about over anyway, so good luck with more short squeeze powered super rallies. 'Full retard', AKA Pat53, in the rear view mirror.

pat53's picture

LOL, you are a fucking don't a clue about whats really going on do you  !??  LOL

SheepDog-One's picture

No I know exactly whats going on, a giant scam that morons have come to accept as the 'new normal' that being total manipulation of all markets.

trampstamp's picture

enlighten us Pat? Would be good to hear what you think since noone really knows what goes on behind the curtain. Not even rich countries.

slaughterer's picture

Thank you ZH for setting up the short squeeze by encouraging the expectation that the ISM would print below 50, and that money markets were freezing up, and printing countless negative things about Greece.  Very good work, you have lined the pockets of your enemies.

SheepDog-One's picture

Pretty hard to make predictions in the rigged mafia casino. I dont act on any of Tylers 'info', I wouldnt touch any of this garbage today with a 10 foot pole. Pretty bad when you have to come up with a new worse level than 'full retard' because thats already been passed by.

plocequ1's picture

Be patient Mr. Sheepdawg.  22 minutes till compression chart 

The Fonz's picture

I would have to agree in this instance with the fellow above. I was too drawn in by ZH's negative outlook. Tyler only makes one mistake consistently, his timing is too early, and he does not communicate this in his efforts to destroy the banks. I see many people with what I have come to call a "will for the market" where a person hopes and believes something that may or may not be correct but fumbles the timing due the bias naturally filtering out the counterstory. Also Reggie has that problem, and so did Turd. So did I.  Time to learn a hard lesson, fortunately lessons this expensive STICK.

tarsubil's picture

Whatever. I haven't been here long but even I realized the market could go either way depending on some cock sucker's whim. I shrugged at buying the top and seeing a consistent down trend but I figured it is only worthless money so WTF do I care? Can't take it with me. This rally is just fucking bizzarro. Just look at the charts. It is just bizzarro. At least to me. I'm new but still. I avoided some painful losses by sticking with it but it could still go either way. Too many arbitrary and secret whims fighting unpredictable events of reality. Blaming ZH for losses when they scrape up muck no one else (shills on both sides) wants to talk about points to a lack of personal responsibility.

The Fonz's picture

I don't blame ZH for the mistakes I made. I think I note that in the post above. However even as I have made a mistake ZH also makes the mistake of overwealming bias, that does not always serve well its own intrests.  If I am to take responsibility for making choices, so too does ZH take responsibility for giving advice. I do not blame ZH for my losses, however factually speaking by reading ZH is THE reason I went short. It is always my responsibility for what I do and choosing the best voices to listen to. ZH is the best voice to listen to, and it can become even better than it is.

tarsubil's picture

Yeah, my post read too critical of you but it was meant to be more general. Or I jumped the gun on my response. Sorry about that.

Girl Trader's picture

td does not blog for the purpose of telling you what to trade. he gives you extremely high quality macroeconomic and financial information. you must make all trading and investing decisions. You are responsible for your decisions.

mcguire's picture

ZH is not about trading advice!!!  it is about WAKING UP!!!  it is the Red Pill of Finance... 

mcguire's picture

ZH is not about trading advice!!!  it is about WAKING UP!!!  it is the Red Pill of Finance... 

qussl3's picture

Which firm's research gets the most airtime here?

Nathan Muir's picture

People like you crack me up.  Took a bath today and want someone to blame huh.  Perhaps when the market tanks and you get caught long you can start trolling

10kby2k's picture

ZH jumps on every shred of negative evidence and promotes it as the trigger that will cause the crash. If ZH doesn't moderate some they are becoming the anti-cramer/ludlow...the know it all that represents the other extreme....and does not posess an open mind. This post is going to go over real well.

treemagnet's picture

Not from me - I don't agree with you, but I'm all for lots of opinions.  I think the degree to which Ben's willingn to go to keep pushing the limits of comprehension around here (and the responses to each fraud) so it appears to some that ZH is too one-sided.  And no I didn't junk you.