Did The Shorts Capitulate?

Tyler Durden's picture

We noted yesterday that the 'gains' that shorts had temporarily enjoyed from the start of April were rapidly squeezed out since the gap-open lows on NFP Friday. However, yesterday's massive outperformance of the Russell 3000's 'most-shorted' names relative to the index itself suggest more than a few weak hands threw in the towel. Desk chatter this morning was that this was the largest cover day since June. Of course, this morning's ramp suggests there are more stops and shorts to be chewed through yet...

Intriguingly the short cover stopped (or slowed) as the FOMC Minutes were pre-released... (around 2pmET)


Charts: Bloomberg

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bigrooster's picture

I sold my SPXU and TVIX positions this morning and went all in BITCOIN!  The market will crash tomorrow.

MortimerDuke's picture

No offense, but I sure hope so.

DeadFred's picture

Tyler, please post when you see what looks like the blow off top :)

<twiddling thumbs waiting>

fonzannoon's picture

The cool thing is that markets have reached such a high point that they can spark a 2 percent correction and the suckers will come flying in thinking this is the big one and they can just burn them all over again.

Bernanke can continue with this back and forth bullshit exit debate for an eternity. This will be the mother of all bubbles and we may just be in the early innings. I know no one wants to believe that.

TheMeatTrapper's picture

The more I watch the bankers and their ability to keep the charade going, the more I tend to agree with you. My prepper friends scoff at me when I tell them it may take another 20 years for the market to crash. The problem is that "nobody" (except a few of us) really want an honest market. The people, the governments, the corporations and of course the banks - almost everyone wants the charade to continue forever rather than take their medicine. 


waterwitch's picture

$5/gal gasoline won't be too kind on the stock market. Coming soon to a pump near you.

(you can ignore this Californians and Hawaiians and EU because I know you're way past that)


fonzannoon's picture

Nobody cares. if earnings are harmed by $5 gas they will just fudge them.

Yen Cross's picture

      It's just a big circle-jerk for the P/Ds anyways. They each sacrifice one day a month in the barrel, to give the illusion that there are still shorts in the market.

fonzannoon's picture

I guess it's just the PD's and myself in this market Yen. I have some gains that I never thought i'd ever see and some short hedges that are like an anchor dragging along the bottom. All I have to do is take off the hedges yen and I can sail into the sunset. It will be so beautiful Yen. But for some reason I just leave that anchor out there.

Yen Cross's picture

      I have a few anchors myself Fonz. I keep waiting for the... caugh caugh... retrace, but it's no where in sight.

DeadFred's picture

One missle flies through the air and the market will shut down on the first trade of the day. Just hope your counter-party is still solvent when you cash in. Each day gets frothier than the last.

Dr. Engali's picture

The amount of fools willing to step in front of the Bernank and be seperated from their money simply amazes me....Here's a tip...when the time comes to short this illiquid bitch ..it will be too late.

fonzannoon's picture

I am not stepping in front Doc. I am in the sidecar. It's me and the Bernak doc. There is room for one more. Don't worry he promised he would tell me when he was about to hit turbulence and he said he would pull over so I could get out.

Great news Doc! Have you heard?  Bernak is going to shove you into that sidecar.

"Fidelity Investments President Ronald O'Hanley on Wednesday proposed that U.S. lawmakers increase the default savings rate to at least 6 percent in retirement plans, double the rate laid out in landmark legislation passed in 2006.

O'Hanley also said Congress should require programs that automatically increase savings rates in U.S. retirement plans. While he favors an opt-out provision, he said inertia tends to keep U.S. workers on the right savings path once they are automatically enrolled in a 401(k) retirement plan, for example.

A key problem, as he sees it, is that Americans are not saving enough to support themselves in retirement. He said Fidelity's research shows nearly four in 10 retiree households do not have sufficient income to cover their expenses."

It's not that they can't, apparently they just chose not to do so.

ThunderingTurd's picture

I couldn't agree with you more.  Betting on a pullback is throwing bad money after bad. 

The Tao's picture

So you're saying that the technicals don't count any longer?  ES is 9+% over the 200 Day MA, how much longer can that be sustained?  There is nothing supporting this move, especially today, but the QE, nothing in the least.  The farther that they push it, the harder it will fall.

Straw Dog's picture

The Tao

Agree. There is serious deterioration in the fundamentals, and the technicals signal an oncomming fall. The idea that Bernanke and other central banks can support the equity markets strikes me as a unusual manifestion of "It's different this time"

The Tao's picture

Straw Dog,

"Serious" doesn't do it justice.  There are macro divergences between the underlying economic data (Jobs on friday, ex.) and there are AMAZING diverences in nearly every chart, from the monthly (long term) to the fast tick/time charts.  But, the market WILL NOT react.  It's not like the divergences become continuations, they just DO NOT REACT.  But, they will, and when they do it's going to get ugly.

ThunderingTurd's picture

I don't disagree with your observations, but it can last as long as the data continues to be shrugged off (both technical and qualititative).  No reason we should have ramped after Friday's open, but we did.  Trading since Friday has been humbling.

akarc's picture

"Trading since Friday has been humbling."

Even more humbling, but also very alarming is the lack of "reason" for it. 

Ramps like this when one accidental missle firing fromo N. Korea can change the whole landscape? When fundamentals have deteriorated not improved.

How long can 85 billion be pumped into the system until crash or super inflation have the same results?

My little money up on a ramp or down on a pullback means nothing compared to the real players.

There is very dangerous game being played in here and forgive me if I do not believe it is to restore balance to the economy.

chubbyjjfong's picture

I tend to agree with ekm. Why would the big boys want to crash the system in an environment where they can buy every commodity with easy printed money. They are buying and stacking oil, property (toxic MBS loans), companies, businesses, gold, equities.. everything. An outside trigger is what is gonna blow this thing up and the elites can just sit back, watch and buy with their feet up. Until an outside catastrophic, uncontrollable event manifests itself, this charade will continue. When it happens, it just makes it all the easier for the elites to swoop in with everything and control the masses with a new system. 

The Tao's picture

"There is very dangerous game being played in here and forgive me if I do not believe it is to restore balance to the economy."

Very well said akarc!

One thing that has always frustrated me is when people (and the MSM) make cracks and jokes about how "stupid" politicians are, and how the actions they're taking don't make any sense.  I tend to throw banksters in that mix as well.  Sure, their actions seem stupid, inept, and down right reckless when viewing them through an altruistic lens.  The people tend to think that the people in power like them, need them, and want them to be happy and healty.  When viewed through that lens, their actions do seem odd, to say the least.  But, if you look at their actions through a lens of evil (for lack of a better word), their intent becomes all too clear. 

This is Neofeudalism at its finest guys.  The American Experiment was one of self-determination and freedom, and is the antithesis of how the PTB want the world structured.  There is a tremendous amount of wealth stored in the American Middle Class, and wealth brings self-determination, and humans determining their own lives chaffes the PTB like a torn pair of boxers on a 100 degree day.  The actions that we see by Bernanke et. al. is about bringing the middle class under the yoke of neofeudalism, nothing more. 

The Tao's picture

So you're buying high Doc?  Sounds like a sound strategy to me.  Oh wait, forgot this is Bizzarro World in which up is down, good is bad, and black is white!

Dr. Engali's picture

Obviously you can't comprehend my my statement. Maybe you should read it again slowly and think about it.

fonzannoon's picture

stop fiddling around and get in the sidecar dammit!

The Tao's picture

"The amount of fools willing to step in front of the Bernank and be seperated from their money simply amazes me..."

I comprehend your statement perfectly; you're calling shorts "fools."  To which I asked, "are you buying here?"

You don't ALWAYS have to be an arrogant prick do you?

P.S. -- someone that cannot spell nor use words properly has a lot of nerve to call into question the intelligence of another!

Dr. Engali's picture

Yes I'm calling people who move big positions fools for shorting this market. It's too illiquid and they can be easily squeezed. If you're a retail investor then this is a great market for picking your spots.

Speaking of arrogant pricks and people who doesn't know the proper use of words ... I suggest you look in the mirror.

The Tao's picture

"Speaking of arrogant pricks and people who doesn't know the proper use of words ... I suggest you look in the mirror."

I am looking in the mirror, and I see a man who has command of the English language.  Show me any improper word usage in my posts Doc.  You, by contrast, try to rebutt me and AGAIN display the very point that I brought up.  Keep trying though, you'll get it one of these days.

Dr. Engali's picture

Allow me to explain it to you slowly, and I will operate under the assumption that you understand what liquidity is. This market, in my view, should be around S&P 600. However the fed is pushing this market up on vapors. The higher they push it the more illiquid the market becomes. As they push the market higher the shorts are tempted to jump on any little downtick thinking " this is the big one". The lack of liquidity in the market makes it easier for the fed to squeeze them out and that brings me to the root of my point; when the time comes to short this market it will be too late..... The gap down will be stunning and in my view it will all probably happen when the market is closed.

The Tao's picture

understood, and well said.

Dr. Engali's picture

Now that we cleared that up, I'm going to apologize if I came across like a prick. That was not my original intention.... maybe I read something into your first post that wasn't really there.

The Tao's picture

I too owe you an apology my new friend (I hope).  I have to confess that I am ticked off because I am shorting this market as I am a technical trader and there are divergences EVERYWHERE, in every chart, yet the mkt will NOT respond.  It's quite befuddling, to say the least.  I know that the technicals will, at some point, exert their pull on this market, but good lord is this a trying time.  I cannot buy at the top.  I will not, and should not.  Yet there are monkey's in the market who are making alpha hand over fist going long and it pisses me off.

Dr. Engali's picture

Hey I'm with you there. Everything about this market screams "short it", however I have been handed my hat going for the big short in this market too many times. I chose a different strategy, and that was to buy the dips and sell the rips (God I hate that terminology ). I pick my spots for a quick short and get the hell out of the way.

The Tao's picture

I hear you Doc.  I am just not used to buying from the top, it's screams "wrong" in my mind.

akarc's picture

Well so much for this ADD, dyslexic one fingered typist

johnnymustardseed's picture

No they got word from the FED to hit Bitcoin and of course gold and silver again

bonzo112358's picture

Not yet but pretty damn close to here.  Walmart short only thing working for me today.  A really nice double top forming around $78.  HD also forming a double top as well.  My finger is on the exit button.  Can't take much more.

akarc's picture

I just keep telling my self gravity does exist, gravity does exist. Obviously Im wrong.

DeadFred's picture

When enough of us ZH permabears start getting weepy and dispondent saying "This rally will never end" then you know it's about to. The algos are reading our comments so everyone start sobbing and send the machines a sell signal.

fonzannoon's picture

Bullshit. As someone pointed out the Argentine stock market rallied 300% on no volume a few years ago. Zimbabwe has the greatest stock market ever. That's what happens when you print money. How did the shorts do there?

Fiat Burner's picture

The FED has been debasing the currency ever since its creation in 1913 and they haven't been able to prevent bear markets in stocks. Delayed them, maybe. So why is it different this time?

fonzannoon's picture

They were able to stop printing at certain points and raise interest rates if necessary.

rubearish10's picture

Shorts?? That's a RED button, so no such thing. 

enloe creek's picture

rolling into bitcoin y'all


thismarketisrigged's picture

look at this quote by this douchebag art hogan in this article.




is this guy fucking serious? he says no catalysts for this market to go lower.


i guess he was in a coma for last weeks terrible data, including the worst jobs report i have seen in ages.

Zexe's picture

weak data=more QE= equities higher after 4 yours you should have known it by now

thismarketisrigged's picture

i should have known by now, but you would think eventually, maybe, just maybe, this market would trade on fundementals. guess not though.

Zexe's picture

remeber, we are out of the realm of real value and only talking nominal value, sky is the limit, anything can happen , price discovery is dead, new age new models.

The Tao's picture

"new age new models..."

Model have a very bad habit of failing at the absolute WORST time.  Garbage in, garbage out.  The new model is to jack the SM up so that two things happen: 1) the Banksters can generate even more profits; and 2) most importantly, to try to trick all the soon-to-be retired Boomers back into the markets.  The PTB DESPERATELY want to destroy these middle-classers and take EVERYTHING they've worked for over the past few decades.  If they just run the market up long enough, like moths to a light (they hope) the Boomers will call their guys and say, "I am back in Baby!"  At that point, they'll yank the rug out.

Problem is, fool me once, shame on you...fool me twice, shame on me!  The Boomers aren't buying it, and the PTB are pushing the markets past all economic support.  When they push it too far, and that point is coming very soon, the true nature of the economy will show through, and it will scare people even more.

Dr. Engali's picture

" Model have a very bad habit of failing at the absolute WORST time"

Should we stop here, or do I need to pull a line from all of your posts?