Is The Short Squeeze Over?

Tyler Durden's picture

Following up on our recent discussion of the worst-is-first rally that we have all been witness to in the last few weeks, we thought it noteworthy that the 'most-shorted' names in the Russell 3000 and the index itself have now recoupled from their epic divergence post-QE3. We have seen five large short squeezes 'engineered' since the lows in March 2009 - and given Citi and BofA's 17% gains in December alone, we suspect (and have heard from more than a few funds) that year-end is bringing some forced buy-ins as SecLend desks become a little more activist.

The 'Squeezes'


QE3's Epic Fail (and Win)... as the index and its shorts have now recoupled post QE3


And despite the fact that half BofA's market cap is at risk in 60+day delinquent mortgage loans, it has scaled the epic ranks of a 17% gain in December alone... all makes perfect sense...


Was John Paulson really Short Financials and Long Gold / Silver - perhaps?


Charts: Bloomberg

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Go Tribe's picture

Post of the day! That's phrase is going to become widely used in 2013.

disabledvet's picture

Again for the record I simply can't wrap my mind around this QE thing Bernanke is doing....having said that Wall Street raises capital by shorting treasuries and going hog wild "everything else." well..."the only else is equities." it would appear The Bernank has a CHOKE hold on Wally World...I really can't even imagine how that place is surviving this "Chines water torture" of a bull market. No volume, no "play", no crazy volatility...just "driving Miss the funeral of another trading strategy." pardon me for not shedding a tear of course.

Tombstone's picture

Futures looking like Benny defected.

IndicaTive's picture

Just going to get the "awesome set of tools."

Go Tribe's picture

There's your Santa Claus rally.

Cursive's picture

No source has done a better job at explaining the market than ZH (with a little help from Nanex and Joe Saluzzi/Themis Trading Partners).  Thank you, Tylers and friends.

ball-and-chain's picture

The boys who run Zerohedge are brilliant.

I'll give them that.

But they've been calling for the final collapse for the last five years.

It just ain't happening.

And no collapse is forthcoming.

We will stay mired in an endless Japanese-style recession till the baby-boomers die off.

Case closed.

ZeroFreedom's picture


This is what I have been thinking, excellent comments,  the US will not have boom or bust but just a slow grind of flat to slightly up growth but in the end it will be a flat line. Japan is dead and will take 3 generations to overcome that mess but given they have a declining population not sure they can be a country in 3 generations. 


Savyindallas's picture

The Japs collapsed from 30,000 to 10,000 as of today. We're less than 10% off our all time highs. If we're going to follow and repeat the Japanese experience, adjusted for inflation, the DOW needs to go down to about 3,500. 

Panafrican Funktron Robot's picture

"And no collapse is forthcoming."

Hard to have a forthcoming collapse when you're still living through the current collapse.

dirtyfiles's picture

Check the chart it was all ways at the neckline of the H&S formations..sure it was orchestrated buy jumping the futures overnight for no real reason.

Lore's picture

ZH: Was John Paulson really Short Financials and Long Gold / Silver?

Weak Theory 1: Evildoers are suppressing real money over the holidays, thus removing a red market flag that might otherwise deter swiping of working-class credit cards and rackage of more consumer debt, which is of course synonymous with growth and prosperity

Weak Theory 2: Somebody wants to take big delivery at a lower price, so drives it down paperwise beforehand

Pity we don't have accountable regulators to examine these weird moves. We're limited to technical tea leaves and grapevines.

Nobody For President's picture

'...accountable regulators...'


Now THERE is something to ask Santa for. Might as well. Better chance to get from Santa than from Congress.