Charting Nine Days Of Short Squeezes And Vapor Volume

Tyler Durden's picture

Still unclear on what drove the policy vehicle known as the stock market straight up, which for some reason speculators still participate in despite relentless warnings that it is broken, manipulated, etc, for nine consecutive days, following the release of the FT rumor of a bank recapitalization on October 4, since refuted? Simple: look at the chart below. The Green is the Russell 3000, while the Red is the Goldman "highest short interest index." Beginning with September 4, and continuing through today, every time the market appeared poised to drop, market makers would mysteriously squeeze shorts, with the Red line consistently leading the overall market (Green). Said otherwise: shorts panic -> weak hands cover -> market follows. Naturally, for this to work, volume has to be well below average, which was indeed the case - the volume has been abysmally low for the duration of the entire melt up which means the second there are no incremental weak hands to short, and the movement flips, most likely on the fully priced in deus ex bail out of Europe which will not happen next week or ever, massive volume will return, and the market will do what it always does in such situations: soar inversely. Until then, and as always, it is best to play in other, less manipulated venues - buy some CDS, arbitrage some shiny rocks, blow some money on Blackjack, just stay away from the frontrunning algos whose only purpose is to sniff out weak shorts and sell stops. There is no market: we would say it is a casino, if only it was even 10% as fun.

Short summary:

ES Volume:

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Libertarians for Prosperity's picture



Short squeeze in everything but MBIA



He_Who Carried The Sun's picture

...its all a well known bankster-phenomenon: concerted margin calls all across the field... ;-) !!

Precious's picture

Okay.  Here is the truth.  The insiders whispered / leaked Q3 results to traders who made sure they were frontrunning the earnings announcements.

Just figure it out.  It's right there in front of our faces.  This one week rally was nothing more than frontrunnning the positive earnings announcements.  That's it.  If you had a contact inside these companies, you could make a small fortune.

End of story.  Quit looking for all these BS reasons and irrationality theories.  It's simple greed.  Insiders shared sales information for Q3.  Bye.

LawsofPhysics's picture

No shit, never short the market going into earnings season.  How much of a boost we are going to get is the question.

Mike2756's picture

I don't think earnings will matter, not when the credit markets are locking up,  they might mitigate the downside a bit.

He_Who Carried The Sun's picture

You talk as if P/E-value were of some importance right now.

While it is true, that I felt things were getting a tad cheap also, one wouldn't go long waiting for Merkozy's axe. There is more at stake here and I need more than a fabricated "beating the earnings by 0.001 cent" to get "all-in" again ... This is called a catapult trade. Sustained by earnings? Sorry, I highly doubt it.

Precious's picture

We should hook up.  My ring in your nipple.

As far as your comment goes, research GOOG.

He_Who Carried The Sun's picture

My field is Metals and Comm'ies. No money in Tech...

What is a phone without Spaghetti ...?

Precious's picture

Aha.  From your profile pic, perhaps everything come down to a "short squeeze".

He_Who Carried The Sun's picture

*lol* I doubt it would convince me at this point. Try again later....
Seriously, I am riding this volatility with very tight stops, but I am not going all out long again before they've solved Greece. Macro supersedes micro in this and I have a job to lose... Cu then.

J 457's picture

Just like the last three quarters, earning estimates have been revised so low that most everyone will beat.  The party will be over by next week.  If we open higher on Monday I may buy a few positions and hold into mid week, but most everyone is still too overly cautious knowing a 15%-20% scalp can happen over 2 days, just like on Oct 3-4.  I'm surprised the 1.4 trillion US annual deficit didn't cause a shake-up earlier today.  When people start ignoring numbers that big the end of this fluffed market is near.   Also, nice boobs.

Market Efficiency Romantic's picture

you are saying any buy side actor would massively allocate in risk right now based on GS suggestion of - as anticipated - positive Q3 earnings? And they would do so knowing that any news out of Europe could kill the market immediately.

Lets wait and see what stats will tell and how the regulatory body (probably not at all) will react to at the end of the month/quarter. I bet, the extreme market dynamic will not be possibly explained by allocation changes, so only the bias in market making will be able to explain it. But with the volume asscoiated with market making, a newly ermging long-bias will in relative terms not appear to be relevant and easily explained with the then in the course of the upside move required liquidity at the ask.

Thank you and fuck you banksters. As said below, my theory is, it is again all Timmeah with his perceived outsmarting of markets. What is possibly wrong with him that he has become so over-self-confident and show an almost desperate need to demonstrate that he is playing the wild and uncontrollable market beast.

He_Who Carried The Sun's picture

Don't ask, you won't sleep anymore!

Yamaha's picture

Can't even see those at home with an expensive dinner with good wine...........

Roscoe's picture


I laughed so hard beer came out of my nose. I nominate your comment as Word of the Day.

Thanks for a good chuckle at the end of a tough week.


Don Birnam's picture

Volume is truly running on fumes. High-liquidity blue chips are simply falling asleep: JNJ traded 6.6 million shares this session; average volume, 15.2 million. Of course, the stock was up a bit less than one percent.

A low conviction market, to say the least.

caerus's picture

the ES since august has been absurd...vacillation on vapor volume (except on the down days) stuck in a range for more than two months now...nothing of any import being solved or even considered...shorts getting squeezed despite the fact that they are entirely justified and correct in their positions...ES will NOT hold the neckline...

caerus's picture

oh yeah...check out the large traders vs small traders/hedgers on ES COT

ghostfaceinvestah's picture

Get used to it, this is the same thing that happened all through the second half of '09.  Seems like it is on someone's agenda to keep the stock markets from crashing.

jdelano's picture

they can't, and it will crash.  The minute you're sure we're ramping into the end of the year.  They're driving it up for greek default so crash will only bring us to 950. 

devilsindetails's picture

It WILL crash... eventually. Not now.

jdelano's picture

Should we start a betting pool on who calls closest to the date? I'll put up the prize--ZH t shirt to the winner. But I want November 14th, and we have to define crash. First circuit breaker trip on the Dow?

eurusdog's picture

Ill take November 18 2011. Agreed on first circuit breaker!

lano1106's picture

anything special backing this prediction or this is just a gut feeling?


SheepDog-One's picture

1220 is the top of this channel and theres no further benefit to pump it higher on fumes, just wash, rinse, repeat. WTF look at the long range chart we're right where we were months ago, and going further back 1999 market levels. Big deal.

ghostfaceinvestah's picture

It's a big deal we are at 1225 today and not 925, a very big deal, and Bernanke knows it.

SheepDog-One's picture

How is 1225 a big deal over 925? Its a dead empty market the numbers mean nothing! 

I guess if I had an old rusty VW bug for sale at $10,000 and raised the price to $15,000, I'd suddenly be richer?

TheLooza's picture

You would be, according to JP Morgan.


Also, can I get a ride to the mall?

ghostfaceinvestah's picture

300 S&P points means a lot to corporate, state, and local pension plans, it means a lot to university endowments, it means a lot to charitable foundations, not to mention individual 401ks, etc.

You seem helplessly naive of the impact the equity markets on our modern society.  Forget all those statistics like "the top x% own y% of the stock market", the truth of the matter is our society is highly leveraged to equity valuations.

Bernanke understands this, apparently you don't.  Enjoy your grumbling though.

Market Efficiency Romantic's picture

That's exactly what I realized and I am beginning to realize that it appears wishful to the money and power elites to involve the system into its game at the top. But from an incentive-theoretical point of view, the control over the regulation of a market by a government, whose legitimization and support is directly correlated with the fate of the market, makes the potential and incentive for market making instead of EMH rather likely. Such welfare involvement prohibits EMH effects to one side and by that either creates an endless bubble or convinces capital to move to a more reliable and transparent playing field. Even with the US being the largest equity market, I would in the medium term argue for the ladder outcome.

DollarDive's picture

The points do mean something.  I think that the meaning gets more watered down - the longer the recession persists.  The longer that it continues - the higher the probability is that people are spending down assets - thereby reducing the significance of the financial markets to the middle class.  With more than 50% of the households earning less than 50k, there's not a lot of savings going on.  Assets are being spent down.  

The middle class is less enamored with wall st each day.  Check out the protesters.  They're not exactly future Warren Buffets.... right ?  

The money of the wealthiest is being managed and gamed by the hedge funds.  Ultimately it may be 10 or 20 of the largest and most sucessful hedgefunds fighting it out for supremacy.

mjk0259's picture

Yes and then issue bonds on the rusty VW and lower the price back to $10,000 and book the reduced value of the bonds and you have income as well. Buy the bonds back. Repeat. Spokesman on CNBS in between steps to hype in desired direction the value of rusty VW's.

LawsofPhysics's picture

Yes it is, now about tomorrow, the rest of earnings season and the new year.  With 400 billion more entering the system I am pretty sure who is squeezing the shorts.

jdelano's picture

Come on--you really missed the part about 400bil leaving the system first?

LawsofPhysics's picture

Okay fine, the coming and going really doesn't matter does it, just stay ahead of it.  Personally, I am more short than long, not as much as I was in June, but still short, just the same.

unununium's picture

Methinks the reaction to QE 1 and 2 would have been a tad different if Fed had announced it was buying $900B of 30yr bonds.

jdelano's picture

Nope.  I still say range, range, range.  horsey go back down soon.

SheepDog-One's picture

Wash, rinse, repeat. This is only a crowd control show, but theyll be happy to take as much long and short money in the meantime as they can.

Manthong's picture

“we would say it is a casino, if only it was even 10% as fun.”

 - And we don't even get free drinks, a nearby cheap buffet or lobby hookers.

Hansel's picture

Crack-up Boom!

danger close's picture

Short covering rally, lmao. This bipolar website is as bad as the market; dangerous for your health. One day nothing but doom and then blame on short covering. Fear mongering would be more appropriate for you. Past two years market exploded and entire time nothing but crying here. This site pimped this bullsht Short covering rally last month only to see another low. Nice call! Sick fking clowns.

SheepDog-One's picture

Well what are you saying IS causing a run up on no volume then? Bulls buying hand over fist? No thats obviously not it.

jdelano's picture

um...short covering rally would hardly preclude new lows.  dumb ass.  

HedgeAccordingly's picture

thats how short covering works you fucking idiot. tyler is simply highlighting how wallstreet gets everyone short and squeezes them until they puke. then crashes back down.. the market has exploded higher by QE easing and spin. This website gets record traffic and grows every month. Somone is listening, if this sit was a bunch of bullshit i dobut it would get over a million pageviews a day. you can actually make money by getting long when tyler posts short interest at record highs because you know a squeeze is coming.. 

SheepDog-One's picture

I dont even believe this line that we have world record shorts available to squeeze daily....this is the FED short. They do it for free, its your money they pile in short and then squeeze.

oldman's picture

That is a pretty smart thing you wrote   green for sure

How do I get my fucking money back from the Fed?

Don´t tell me I have to take it because I will.

You´re a smart dude Sheep      om