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You Know It's A Top When...

Tyler Durden's picture




 

For many months we have discussed the massive outperformance that buying the "most shorted" stocks has created. The 'alpha' generated fro buying the weakest balance sheet companies in preference of the stronger has enabled the dash-for-trash strategy (just as we saw yesterday when Tepper unleashed hell) to be the new meme. And so it is, like anything that is popular, ETFTrends reports that ETFis - a turnkey ETF provider - has filed with the SEC to launch an actively managed short squeeze fund.

Buying the most-shorted has been the best strategy since QE3 was unleashed.

 

As we showed yesterday.

 

 

And so why not create an actively managed short squeeze ETF...(as ETFTrends reports)

ETFis, a turnkey exchange traded fund provider, is working on a so-called short squeeze fund to help investors capitalize on a heavily shorted market that is beginning to turn around.

According to a recent Securities and Exchange Commission filing, the actively managed Short Squeeze Fund (SQZZ) will seek to outperform the Russell 2000 index and earn current income.

...

The ETF’s managers will select U.S. stocks and American Depository Receipts that they believe may be subject to a “short squeeze” and lend portfolio securities that they believe may be subject to a short squeeze.

Basically, the fund managers will pick out securities that have a higher potential for capital appreciation, which could result in a short squeeze.

A short position is a sale on a borrowed security. The investor needs to eventually return the borrowed stock by purchasing it back from the open market. If the price falls, the investor buys it back for less than he or she sold it for and pockets the profit.

 

A short squeeze occurs when investors with heavy short positions are forced to cover, or buy back, their shorts in the event of positive reports that result in a share appreciation – short sellers are essentially being squeezed out of their short positions, typically at a loss. Consequently, the additional buying momentum from short sellers covering their options contracts help bolster share prices even further.

 

Investors can identify securities at risk of a short squeeze by monitoring short interest -the total number of shares sold short as a percentage of total shares outstanding – and the short-interest ratio – the total number of shares sold short divided by average daily volume.

 

For the fund’s secondary income objective, SQZZ can lend out securities from the fund’s underlying portfolio to short sellers and other market participants for a fee.

and as we noted recently, here are the "most shorted" stocks currently.

 

 

If it's really that easy a top must be close. At least until the next central bank liquification intervention... all to benefit the savers of course.

 

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Fri, 06/06/2014 - 13:56 | 4830637 machineh
machineh's picture

Actually, it's a top when there's such a thing as a 'turnkey ETF provider.'

Every one of us should have his own trading symbol.

Fri, 06/06/2014 - 14:05 | 4830668 RockRiver
RockRiver's picture

It's a top when it tops...

 

Looking at a chart, I don't see a top. I see an uptrend.

 

Doesn't matter that it makes no sense at all, it is what it is and fighting it for any reason hasn't made any money.

Fri, 06/06/2014 - 14:10 | 4830682 khakuda
khakuda's picture

Agreed.  Though one needs to be cognizant that we are partying like it's 1999, the path of least resistance is higher.  1999 ended with insane valuations and a tightening Fed, we don't really have the first broadly speaking to the same degree and the second appears like it won't happen ever...at least for now.

Fri, 06/06/2014 - 14:48 | 4830816 0b1knob
0b1knob's picture

The contrarian idea of buying heavily shorted stocks has been around since the 1870 at least.   Its not guaranteed to work but when it does the results can be very profitable.

Fri, 06/06/2014 - 15:42 | 4831031 Say What Again
Say What Again's picture

This is really a "Friday Humor" thing, right?

 

Fri, 06/06/2014 - 14:12 | 4830692 ebworthen
ebworthen's picture

"Turnkey", hate that word, hate it.

Makes as much sense as "twistknob".

Why do I need a key?  Is the door locked? 

Open the damn door, I don't want to have to use a key.

Fri, 06/06/2014 - 14:37 | 4830768 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

Maybe he meant "turkey"?

Fri, 06/06/2014 - 16:35 | 4831214 Say What Again
Say What Again's picture

I'm going to be twisting some knobs tonight

Fri, 06/06/2014 - 15:08 | 4830905 slaughterer
slaughterer's picture

Everybody is bullish the Taper.   Why?  Stockholm's Syndrome on a massive scale.  

Fri, 06/06/2014 - 13:57 | 4830640 PlusTic
PlusTic's picture

it tops when the first hero puts a missile thru the front door of the FED, not until...

Fri, 06/06/2014 - 14:00 | 4830655 PartysOver
PartysOver's picture

When you here a knock on your door do not open it.  It will be HomeLand Secrurity offering you a free vaction to The Grand Resort Of Reeducation.

Fri, 06/06/2014 - 14:02 | 4830659 PlusTic
PlusTic's picture

i'd love it...

Fri, 06/06/2014 - 14:47 | 4830809 aardwolf
aardwolf's picture

CALLING ALL ZEROHEDGE READERS:

DO YOU WANT TO END THE FED? DO YOU WANT TO TAKE BACK THE POWER TO CREATE MONEY FROM PRIVATE BANKERS??

 

SWITZERLAND WILL HAVE A REFERENDUM THIS YEAR TO DO JUST THIS!! THEY WILL START ISSUING SWISS FRANCS DEBT FREE LIKE YOUR OLD GREENBACK!!! THEY WILL REMOVE THE PRIVATE BANKS POWER TO CREATE ELECTRONIC DEPOSITS AS DEBT AND RESTORE IT TO THE SWISS NATIONAL BANK, WHICH WILL DO IT DEBT FREE!!

 

PLEASE DONATE HERE THIS SUMMER: http://www.vollgeld-initiative.ch/english/ THEY NEARLY HAVE ALL THE FUNDING FOR THE 100,000 SIGNATURES REQUIRED.

 

DO YOU REALLY WANT THE MADNESS TO END? PUT YOUR MONEY WHERE YOUR MOUTH IS! I HAVE DONATED 10 CHF MYSELF BUT YOU GUYS ARE RICH. PLEASE HELP THE WORLD TODAY! IF THE SWISS SUCCEED WE'LL BE ONE STEP CLOSER TO ENDING THE FED. ACT NOW!!

Fri, 06/06/2014 - 13:58 | 4830644 order66
order66's picture

"buying the weakest balance sheet companies in preference of the stronger"

What broken markets?

 

Fri, 06/06/2014 - 13:59 | 4830646 slaughterer
slaughterer's picture

They should make this Short Squeeze ETF 3X levered, so that everybody can lose their money quickly.

Fri, 06/06/2014 - 14:18 | 4830706 Australian Economist
Australian Economist's picture

Make an inverse of that and I might be interested

Fri, 06/06/2014 - 14:02 | 4830661 NOTaREALmerican
NOTaREALmerican's picture

It's a top when the hopium runs out.   Hopium is created when two or more pathological optimistic humans come in contact with each other and exchange bullshit.    I don't see this happening for awhile.

Fri, 06/06/2014 - 14:05 | 4830667 ebworthen
ebworthen's picture

Putting $100 on a 30-1 double sixes dice roll just means you're three free Scotch's in.

Fri, 06/06/2014 - 14:13 | 4830670 Seeing Red
Seeing Red's picture

I think it's sad that so many people on this website have knee-jerk reactions against modern financial engineering, which is something this country excels at.  The more types of funds and derivatives that are available, the more stable and liquid our fine system is.  That's why VIX is so low now, as everyone recognizes this basic truth.

Fri, 06/06/2014 - 14:26 | 4830733 valley chick
valley chick's picture

That's funny shit.  Next time you might want add a sarc tag.  :-) 

Fri, 06/06/2014 - 22:07 | 4830875 Seeing Red
Seeing Red's picture

Thanks -- it's a deliberate test to measure the forum's sarc detection.  You can see the results for yourself.   The original MDB is my hero (sorry MDB_ ... not you).

p.s.  MDB has/had far too much class to post a follow-up like this.

Fri, 06/06/2014 - 14:49 | 4830815 ebworthen
ebworthen's picture

This country excels at blowing bubbles which crush savers and put 12 million people out of work.  There's your basic truth.

Fri, 06/06/2014 - 16:19 | 4831157 NOTaREALmerican
NOTaREALmerican's picture

(I did get the snark)

Re: as everyone recognizes this basic truth

Sadly, tho, I think allot of people DO recognize this basic "truth".   

Fri, 06/06/2014 - 14:07 | 4830672 slaughterer
slaughterer's picture

The Gov should require all US citizens to receive drips this 3XShortSqueeze ETF along with MERs and SPOOS and make both non-sellable.

Fri, 06/06/2014 - 14:08 | 4830673 QE49er
QE49er's picture

We have been heading up on this rollercoaster for 5 years now, only to find out there is no track on the way down.

Fri, 06/06/2014 - 14:38 | 4830674 AccreditedEYE
AccreditedEYE's picture

Hey! I have an idea... Let's keep talking about a market top. Maybe we can even show pictures of nervous looking traders like CNBS does. With that strategy, we can make a top happen for sure!

Fri, 06/06/2014 - 14:18 | 4830696 ebworthen
ebworthen's picture

The top will be in when Standard and Poor's puts the U.S. back to AAA.

They are considering it if they see "bipartisan cooperation".

Fri, 06/06/2014 - 14:28 | 4830742 machineh
machineh's picture

The top will be in when Greenspan declares after the next 0.01% dip that “my son and I have for some days been purchasing sound common stocks,” and “there is nothing in the business situation to warrant the destruction of values that has taken place.”

Fri, 06/06/2014 - 14:37 | 4830766 ebworthen
ebworthen's picture

And when Yellen repeats Bernanke's performances:

http://www.youtube.com/watch?v=INmqvibv4UU

Fri, 06/06/2014 - 14:16 | 4830698 buzzsaw99
buzzsaw99's picture

It isn't a top until after the fed raises the fed funds rate significantly. Simple really.

Squeeze  my lemon bitchez.

Fri, 06/06/2014 - 14:15 | 4830699 Bryan
Bryan's picture

Welp.  There goes the neighborhood.  No more short squeezes now that people anticipate and bet on short squeezes.  *sigh*

Fri, 06/06/2014 - 14:16 | 4830704 ebworthen
ebworthen's picture

Just heard that Caesar's has defaulted on 30% of their 2018 bonds.

Ooops!  I thought this was a recovery and the economy was great?

Fri, 06/06/2014 - 14:17 | 4830707 buzzsaw99
buzzsaw99's picture

the fed will buy them if gs or jpm are holding any

Fri, 06/06/2014 - 14:26 | 4830735 sunny
sunny's picture

Dammit man, you did it again!  You confused the stock market with the economy!  The recovery OF THE STOCK MARKET is doing just fine.  Since that is the only thing the Fed is worried about, they have succeeded.  ...hurray.  

Fri, 06/06/2014 - 14:33 | 4830759 ebworthen
ebworthen's picture

The 30% was a second-lien too, paying 10%.

Wonder if Caesar's is doing stock buybacks?

You're right.  S&P at 3,000 with tanks in the streets.

Fri, 06/06/2014 - 14:22 | 4830725 SheepDog-One
SheepDog-One's picture

It's a top whenever the banksters feel like pulling the rug out again. And the funniest part is everyone will beg to go along with whatever ransom they demand because now everyone's entire net worth is at their whim. Planet Sheeple.

Fri, 06/06/2014 - 14:23 | 4830728 firstdivision
firstdivision's picture

How long until the options are launched?  I am going to have my family go long and buy every call available.

Fri, 06/06/2014 - 14:32 | 4830753 buzzsaw99
buzzsaw99's picture

it would be cheaper to buy every car available

Fri, 06/06/2014 - 14:28 | 4830740 astoriajoe
astoriajoe's picture

This is the kind of financial innovation that makes the U.S. market the envy of the world universe.

Fri, 06/06/2014 - 14:30 | 4830749 machineh
machineh's picture

You know it's a top when ... you forecast S&P 3,000, and get massively upvoted.

Fri, 06/06/2014 - 15:29 | 4830988 Dre4dwolf
Dre4dwolf's picture

When there is a computer spitting out currency digits non-stop around the clock feeding an equity buying algo , there is no such thing is a top.

Fri, 06/06/2014 - 15:51 | 4831064 Squid Viscous
Squid Viscous's picture

just about time for another "holocaust"

Fri, 06/06/2014 - 16:01 | 4831102 icanhasbailout
icanhasbailout's picture

Hey folks, I am looking to solicit articles on the following topic:

If you were given dictatorial power over legislation and the economy, what would you do to fix the mess we're now in?

 

contact me at icanhasbailout@gmail.com if you have any idea at all how it might be done or are interested in having an article of your own authorship published

Fri, 06/06/2014 - 16:06 | 4831124 NOTaREALmerican
NOTaREALmerican's picture

Personally,  I don't think there's a fixable problem.    The US is functioning perfectly in the context of a survival-of-the-fittest winner-take-all society that a majority of people in the US are comfortable with. 

Fri, 06/06/2014 - 17:21 | 4831338 icanhasbailout
icanhasbailout's picture

I don't doubt it. I was trying to brainstorm on how the problem might be fixed and an all-out collapse averted, but I'm coming up blank, which I rarely ever do when setting my mind to something. I'm not even sure where to start to deal with even the hot money the Fed pumped into the system alone.

Fri, 06/06/2014 - 16:20 | 4831159 Save_America1st
Save_America1st's picture

PM's update from Turd Ferguson.  A good read and some great analysis too.  Bottom line:  Save your dry powder for PM's until the end of June as we could be goin' lower, folks. Then back the fucking truck up!!!

Clarifying The Picture For June

http://www.tfmetalsreport.com/blog/5811/clarifying-picture-june

#TurdArmy

 

Fri, 06/06/2014 - 16:37 | 4831195 razorthin
razorthin's picture

You know it is a top when the most top-ready crowd - Zero Hedge commenters - refutes a top-calling article in majority.

Fri, 06/06/2014 - 17:29 | 4831356 ken
ken's picture

Lol! Oh, shiiiiiiiiiiiiiiiiiiit! WTF???

Fri, 06/06/2014 - 21:32 | 4831744 BeagleOne
BeagleOne's picture

I know it will never happen, but a 50% decrease in the s&p500 & the djia would be the best thing that could occur.

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