At The End Of May NYSE Short Interest Soared To November 2011 Levels, Leading To Epic Short Squeeze

Tyler Durden's picture

Wondering just what precipitated the near-record short covering squeeze in the first week of June on nothing but speculation of a Spanish bailout (hence materialized, and proven to be a massive disappointment), and the latest Hilsenrath rumor of more QE? Look no further than the chart below: as of the end of May, the short interest on the NYSE soared by over 800 million shares, bringing the total to 14.3 billion, the highest since November 30, when the market was 6% lower. And since the street's repo desks were fully aware the market was overshorted from a historical basis for this price level, it would be very easy to initiate a short covering squeeze, kicking out the weakest hands which had piled in in the second half of the month. The issue is that now that these shorts have been burned once more, even as the market is once again tumbling, and there is no easy way to spook a liftathon when every offer is lifted regardless of price, the next attempt at levitating the market on mere speculation and innuendo will be far more difficult. At this point it is all up to the Fed: unless Ben delivers in 9 days, it may get very ugly. And of course there is the apocalyptic scenario, where Ben does hint at the NEW QE, and the market pulls a Spain bailout, ramping higher as a well-habituated Pavlovian dog, only to plunge. Because if the central bank is unable to lift the stock market, which directly and indirectly accounts for 68% of all US household assets... what else is left?

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francis_sawyer's picture

Well now we can put to rest the MDB & his Facebook longs rumor...


"Because if the central bank is unable to lift the stock market, which accounts for 68% of all US household assets... what else is left?"

MDB clearly needs to pony up & do some dollar cost averaging...

stocktivity's picture

Seriously.....what else is left? Great question.

RiverRoad's picture

What else is left?  Why, gold of course: the glue that's holding the world together.  You hafta know the world will get around to remembering that little fact sooner or later. 

andrewp111's picture

Uncle Ben can always lift the market if he tries hard enough.  But why should he bother until September-October? Stimulus at that time will be better for Obama, and thus better for Bernanke's chances of staying in power until 2018.

Mordan I's picture

I bite my tongue at me Sir!

HD's picture

68%?  I had no idea it was that high.

No wonder the market feels entitled to another trillion in QE after a tiny 8% pullback.


HarryM's picture

Then it stands to reason that the market should melt down prior to the Fed meeting.



bdc63's picture

that 68% number is not right ... I don't know what they meant by "indirect" exposure to the stock market, but in there lies the lie.

Mordan I's picture

you do bite sir! your thumb?

Mike in Tokyo Rogers's picture

When is this bad movie going to end? I've been eating so much popcorn over these last 4 years that I now weigh over 700 pounds!

CharlieSDT's picture

You better get a couple dozen more buckets.

trebuchet's picture

yeah here come the REAL issues...


Have a look at this article outlining the German backed plan for FEDERAL EUROPE

Things are going to move RAPIDLY over the next couple of months

semperfi's picture

"Because if the central bank is unable to lift the stock market... what else is left?"

Someone better get Mars on the phone.

HelluvaEngineer's picture

Let's see...famine...locusts...

semperfi's picture

...human sacrifice - cats and dogs living together - mass hysteria!

Nobody For President's picture

Perhaps it is time to legalize dope - not just mary jane but all of it, what the hell. Big goose to the market when all the cartels IPO, and if it busts - your drug of choice is near at hand and all legal. Why be restricted to booze?

The Gooch's picture

I would hedge that the "cartels" are the true definition of TBTF. The fence just doesn't work. Cartelbook.

IAmNotMark's picture

Sorry...the only reason that drugs are illegal is all of the money being made.  Law enforcement, lawyers, judges, prisons,...  that's a lot of cash flowing.  Plus the whole power thing.  Making citizens into subjects.  The War on Drugs has been a huge success if those are your metrics.  Legalizing it?  Wow.  That would end a lot of gravy trains.

bshirley1968's picture

Yeah! A bunch of government suits and "heroes" with badges would have to live off welfare or go get a real job.

decon's picture

Same with wildland firefighting on public lands in the west.  Huge gravey train for fed employees even though about 80% of the plant communities coevolved with fire.

hedgehog9999's picture

Today was SPX 's longest down candle since the recent top at 1417 or so.., it does look like wave 3 down is just starting FACEBOOKING all those believers in Geithner, Garzarelli, and the french broad from the IMS along with the now Subordinated Spanish guys pontificating their bailout ....................


HaroldWang's picture

Was quite a large candle and should signal more downside but headlines prevail. We just go this:

Barroso proposes further E.U. bank integration: FT

Futures came off their lows and went green quickly.

hedgehog9999's picture

Wave 3 down baby for all us shorts!!!! 

a long candle like this indicates a major change of trend, ominous indeed as it happened after a textbokk ABC correction upwards.


RationalPrepper's picture

I'm a dunce...but I think the Fed disappoints this month.  Maybe they extend Twist, emphatically and redundantly preach ZIRP, and try and jawbone the market again by promising they "won't hesitate to ease if necessary."  The market will then show them how "necessary" it is and they're printing later this summer or early fall.  Rinse...wash...repeat.  Until even helicopter rides don't work anymore.

you enjoy myself's picture

agreed - its just going to be more jawboning.  which of course might be sufficient for a 1-2 week squeeze.  but there's no way the Fed is blowing up its balance sheet even more at this stage.  EUR is doomed, yes, but it hasn't blown up yet.  oil is still too high.  SPX is still too high.  interest rates are still too low.  QE'ing has had 3 years to have the slightest effect on employment or lending - it didn't.  what possible rationale can Ben offer now?  yeah, its always been about giving the banks a free carry trade and finding someone to buy our bonds, but he at least was able to pretend there were other legitimate reasons.  those are gone now.

Rainman's picture

Obeyme is kicking on Merkel to make the print, which she ignores. You think the blamer-in-chief ain't got his foot up Ben's ass to print too....?? Hell yeah !

you enjoy myself's picture

didn't mean to say he wouldn't - there's no other play in his playbook.  he's just not going to do it 9 days from now.  because QE-lite will do absolutely nothing apart from make monetary policy a campaign issue.  either Ben goes big or he doesn't go at all - no one is going to tolerate perpetual QE, so QE 3 better count.  and you can't justify going big when oil is $100, SPX is 1300, gold at $1600, 30-yr mortgages are below 4%, and unemployment is "8.2%"

crap needs to fall apart at least a little bit first.  you can't unleash a $2T LSAP when the only stated purpose is to wealth-effect your way to SPX 1700.

andrewp111's picture

Uncle Ben will buy 5 Trillion worth of  MBS and European debt in October. Until then it is just jawboning and window dressing.

Mordan I's picture

I bite as a dick does bite apon that what it can.

Dapper Dan's picture

The elite are planning for a major exit, or ........................??????

CNBC tweeted:

Berkshire Hathaway's NetJets places $9.6B order with Bombardier, Cessna for 425 new aircraft, the largest private aviation order in history.
Paul Atreides's picture

Large airlines are going to have a difficult time with operating costs very soon...

booboo's picture

And I have a star named after me, taking delivery is another story. Just more hopium for the dopiums.

stocktivity's picture

How much did that cost you and what company did you pay that owns all the stars? Just curious.

news printer's picture

Peter Schiff testifies before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity. Hearing entitled "Oversight of Federal Housing Administration's Multifamily Insurance Programs." Thursday, June 7, 2012 10:00 AM in 2128 Rayburn HOB.


WillyGroper's picture

Wow, what a turnout from the elected reps!

fonzannoon's picture

So here is my problem with this article. It seems that it has been made painfully clear for a while now that the regular retail client is long gone from this maket. That is illustrated through outflows (weekly) and volume (constantly). So how is the stock market accountable for 68% or household assets? What am I missing?

hedgehog9999's picture

I think that 68% figure includes bonds and represents workers pension money to a large extent.

Zero Govt's picture

Yep, can't imagine in my wildest dreams US households have 68% of their assets in stocks ...most of it is in property and the rest is a bit of cash in the bank and something, not much, in a pension (get it out asap you fools!!)

more manufactured figures, were they from Liesman on CNBC ?

fonzannoon's picture

If it's about the pensions and that is a great point, a lot of them are not lump sumable or beyond the participants control. So thats scary.

LawsofPhysics's picture

Be sure not to confuse "pensions" with 401ks, two completely different things. Very few people actually have a pension.

FearLess_FLY's picture

fonzanoon... I too wonder about things. Article talks about all of the "shorting" going on. A question to Tyler : How come I cant find out about the shorting statistics until AFTER the fact? Where can I find this info direct ?

100pcDredge's picture

Ehm... Nespresso?

razorthin's picture

This is precisely what I have been saying to those who doubt QE.  This is it folks.  Italy is next.  No Fed action soon and it is over, finito, lights out - and very quickly.  Of course I wouldn't shed a tear.  In fact, I think things could get crashy well before the June meeting...I suppose being precisely what many believe it would take for the Fed to act.

evolutionx's picture

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