Short Squeeze Goes Parabolic

Tyler Durden's picture

The "most shorted" stocks have quadrupled the performance of the broad market this week as the dash-for-trash remains the best-performing strategy under the premise of an ever-rising strike Yellen put. The ammo for this latest rampapalooza, as we noted here, was hedge fund specs the 'shortest' in over a year which were then squeezed by an ever-present visible hand willing to sell JPY against any and everything in the world (or smash VIX - which ever works best). But as one more skeptical manager noted, "I’ve been a non-believer for so long that I just am not believing yet."

 

What's better than being long stocks? Being Long the "most shorted" stocks...!

 

It didn't take long for investors to full bulltard once again...

h/t @Not_Jim_Cramer


As Bloomberg notes,

Five years after the credit crisis, equity markets are showing zero tolerance for bears.

...

 

“If I were bearish, I’d be very concerned,” Doug Foreman, chief investment officer at Kayne Anderson Rudnick Investment Management in Los Angeles, said by phone. His firm oversees about $9 billion. “What’s it going to take for me to be right? I don’t know. There is no evidence that they’re going to be right any time soon.”

 

...

 

“What we’re seeing is a resilient economy and I’m afraid there’s been a reluctance on some people’s part to focus on the bigger picture,” Howard Ward, the chief investment officer for growth equity at Rye, New York-based Gamco Investors Inc., which oversees about $47 billion, said in a Feb. 25 phone interview. “There’s a lot of good news out there that has not been received.”

But there is still skepticism,

I’ve been a non-believer for so long that I just am not believing yet,” said Landesman, who helps oversee about $1.3 billion. “We’re going to see a very volatile year, with the potential of low 1,500s to the downside.”

 

...

 

“The rose-colored glasses being worn by investors might be cleared in the year ahead as the withdrawal from QE and low rates might be harsher than many expect,” Kass said. The Fed’s stimulus, known as quantitative easing, “doesn’t create a safe world, it creates a temporary high and the danger always comes on the flip side,” he said.

 

But perhaps it's deja vu?

 

As we concluded previously,

...every time even a modest threat of a downside correction reappears, momentum ignition across key FX carry pairs sends the Spoos and other equity indices higher triggering upside stops, which in turn forces even more hedge funds to cover short positions, once again sending the S&P too all time highs. And so on. Until the volume in the market is so low one block of E-mini futures sends the whole thing limit up, and everyone can just sit back and laugh.