Forget The NYSE Shorts, And Be Very Afraid Of The Resumption In Bearish EUR Sentiment (And Squeeze)

Tyler Durden's picture

Just when one thought the oversold status of the all important Euro (by way of the market defining EURUSD) may have peaked and short covering resumed, we once again find that the technical reason (not to be confused with the fundamental one which has to do with EUR repatriation by French banks) why the EUR continues to melt up, and drag all 1.000 correlated assets along with it, is that after a brief retracement in mega bearish exposure in the currency as of last week, bearish sentiment once again returned, and after 8,902 net short non-commercial contracts were covered in the weekend ended October 11, the subsequent most recent week saw another 3,925 net shorts added according to the CFTC's COT report, bringing net short exposure back to near 2011 'highs' at -77,720 contracts. This is, to put it mildly, disturbing, because while stock pundits look at NYSE short interest, in this day and age of ultra low volume and liquidity algo trading, the only real transaction occur on the uber-levered margin: i.e., the EURUSD, where one pip delta translates in roughly 2 DJIA points. But it is explicitly disturbing because while the EURUSD has just closed at 1.39, or the highest (resistance) level since early September when the pair broke down, the net short interest now is well over double when the EURUSD first traded at this level.

Said otherwise, the squeeze can easily continue once the weak hands throw in the towel and force another major short covering rally, which drags the stock market with it. That is of course, unless reality finally manifests itself, the market realizes that all European bail out plans are unmathematical hodgepodge, and the EUR trades down to its fair value somewhere well lower (at least until the Fed's threats of MBS QE become reality). Then all fiat bets are off.

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AladdinSaneGirl's picture

All i know is, i was really glad today to see some funds in my trading account ... first dividends from Russian gold explorer/producer Highland Gold. The rest of it is dire. 

Youri Carma's picture
Fitch says any EU plan won't solve ratings woes, 21 October 2011, by Enda Curran - Sydney (MarketWatch)

Any new deal to shore up the euro-zone likely won't be enough to relieve pressure on the region's sovereign ratings, though France's AAA stamp is safe, a top executive at Fitch Ratings said.

--Euro zone ratings set to remain under pressure, even if a deal is agreed

--France's AAA is safe, no plans to change

--US lawmakers need to cut spending to avoid a negative outlook

dearth vader's picture

Bwah, Fitch is French owned.

GeneMarchbanks's picture

S&P will donkeypunch France into oblivion. It all goes down soon, literally.

Youri Carma's picture


France Likely to Lose Top Rating in Stressed Economic Scenario, S&P Says, 21 October 2011, by John Glover (Bloomberg)

derek_vineyard's picture

The market knows what the rating are.  Fuck the agencies, they are irrelevant.

jeff montanye's picture

and, according to a euroland official, could be subject to banning in the case of bailed out nations.  next up, official banning of reality.  oh wait ....  

went to get the citation and i see it right below and hours earlier.  oh well, it sure does crystalize official thinking.

Irish66's picture

And I thought I was alone

GeneMarchbanks's picture

Yellen wants QE3. If that becomes a topic over the weekend all (EUR) bets are off. We might even breakthrough 1.40 if the QE3 rumors and their derivatives take off in earnest. I'm lost, I'll sit out for the weekend and pick up Asian session Monday.

agent default's picture

QE3 will happen, but probably early 2012.  I think it may be timed with an ECB QE in order for the exchange rate to remain more or less put, and not panic the masses.

Everybodys All American's picture

The Nancy Libtard wants more Keynesian QE? Never saw that coming. /sarc

LawsofPhysics's picture

"That is of course, unless reality finally manifests itself, the market realizes that all European bail out plans are unmathematical hodgepodge, and the EUR trades down to its fair value somewhere well lower"

Well, then we know what the answer is don't we?

Reality to be suspended infinitely - BTFD.

derek_vineyard's picture

New World Order:  Leverage the shit out of the hi and spend....hubris and excesses...don't fight it like peeps here on zero hedge....accept the inevitable of death by gluttony.

maxw3st's picture

I see no reason not to be short something which is fundamentally overvalued. As long as the game continues, and the Euro continues to rise, I will remain short. IMO any further increases are just a delay of the inevitable and create a higher point from which to profit. 1.40 looks sweet, 1.50 sweeter still. Squeeze on that dollar bears.

SeverinSlade's picture

I agree.  I wouldn't advise anyone to go heavily short at any point (unless the news demands it) but each move we make upwards you should consider a small increase in your short position.  I added to my SPXU and SQQQ position today.  If we continue the ramp up, I'll add some more.  Unless we get QE3 tomorrow, the market is going to plunge at some point.

LawsofPhysics's picture

Don't we already have an additional 400 billion of QE coming into the system?  QE3 is already happening.  What am I missing here?

whstlblwr's picture

It's a good way to blow out margin account. Two rules in market that can work: when trader comes on blog self-satisfied for losing prices, run in opposite direction. Or when RobotTrader bragging from bottom or top, also run. You see these both conflicting right now. This guy above can't wait for better shorts price and Robot brags about big long.

Dollar cost averaging works with patience, not every rise is to short. I know most here know this but have to wait week before add to positions sometimes ten days. Someone say the market goes up 70 percent of time, I don't know if true, but careful investor finds out and only takes long positions adding at every plunge.

GiantVampireSquid vs OWS UFC 2012's picture

only takes long positions adding at every plunge

pleanty of those buying opportunities comming right up.

Panafrican Funktron Robot's picture

Fundamentally overvalued relative to what?  The US Dollar?  Is it possible to fundamentally overvalue something against the US dollar (even if it's comparing confetti to confetti)?  This is a competitive devaluation game, do you really think Bennie is going to sit on the sidelines and let Europe win this one?  You must be completely fucking crazy, living under a rock, or just flat out retarded.  Weak dollar = ramped /ES.  The end.

philipat's picture

PPP for EUR/USD is about 1.35 so we are seeing very minor moves around this level actually?

PS. The BIg Mac index no longer works so this does not apply to buying a Big Mac in Paris. Not that anyone other then "The Accidental trader" would actually WANT to buy a Big Mac in Paris?

Triple A's picture

wake me up when this is all over

mynhair's picture

Why?  You'd be alone.

TheSilverJournal's picture

When the EFSF comes together, Greece defaults, and the banks are bailed out, then the scare will be over and the Euro will rise. The USD is deteriorating at a scary pace. QE3 is going to be announced in a couple weeks with the purchases of MBS. That refi program is coming shortly. And that's just what we know of. I can't wait to see a surprise come along.

reload's picture

Anybody know the yen net long/short position size?

Youri Carma's picture

Japan May Spend Extra $52 Billion to Cope With Yen Gains, Documents Show, 20 October 2011, by Kyoko Shimodoi and Toru Fujioka (Bloomberg)

Pretorian's picture

Honestly if the EU clowns find the way to permanently kik the can down the road as US does with deficit, I see no reason of holding US$. Reason: Many bmw's and Merced on US roads but non American cars on Europe roads.No serious manufacturing except gadgets called Apple.


thriftymost's picture

Excellent point. Same thing here in China too: lots of German cars on the roads, but precious few American ones.  The taxicab I rode in the other day was a Fiat.  Gotta be Euro-bullish when the Chinese cab driver chooses Italy over the States--there're just too darned many of 'em. 


winning's picture

LOL .. GM and FORD are both in top 10 for world wide auto sales (outside US). BMW and Mercedes arent even in the top ten ...

wmd's picture

been short since 1.40, continue adding in this "rally", looking for 1.20 minimum

LongSoupLine's picture

Time to scoop up some more silver...physical that is bitchez.

DaBernank's picture

Not to sound like Dennis Gartman but I'm buying gold with Euros on this melt up.

adr's picture

My favorite part of this charade is I think we had the shortest bear market in history. Are we going to have confirmation of a bear market and bull market within three weeks?

And we go spinning, spinning, spinning, round and round and round. When we get off nobody knows.

RobotTrader's picture

Never was a bear market, only a correction.

When we broke down to new lows and took out all support, I was leaning towards a re-test of the March 2009 lows if the acceleration continued.

But this looks like a repeat of Summer 2010, just another huge fakeout engineered by the PigMen.

Here's the shocker:  SPY is only down about 10% with the worst economic conditions in 75 years, the worst financial crisis in Europe in 150 years, and weeks upon weeks of people selling equities and buying bonds.

What happens when things improve and money starts leaving bonds and fleeing back into stocks?

gulf breeze's picture

You never said we would test March  09 lows you just talk about gold.  You post the same idiot trool food on the bear forum.  The mens restroom needs cleaning at your branch.

homersimpson's picture

"What happens when things improve and money starts leaving bonds and fleeing back into stocks?"

If it hasn't happened by now after trillions of taxpayer money to prop up the markets, it never will.


GiantVampireSquid vs OWS UFC 2012's picture

What happens when things improve and money starts leaving bonds and fleeing back into stocks? 

Hell will freeze over, and pigs will fly.

RobotTrader's picture



38 consecutive days with -1000 TICK readings, a new record.$TICK&p=D&yr=0&mn=6&dy=0&id=p37322057532

Surprises are going to be on the upside.

For example, somebody "made their year" already, if they were fully positioned in Harman International and Seagate Technology, up 20% and 28% respectively today alone.





gulf breeze's picture

And some dumb ass blew their account up going long @ 12700 on dow and buying bank stock for last 6 months.  Oh  I forgot you never post trades just rear view mirror 15 min

RobotTrader's picture

Don't blame you for being angry.  You have probably been on the wrong side of the market for weeks now.

Most guys who were short the Euro, short U.S. equities, and long bullion and/or gold stocks have been summarily executed and have seen their trading accounts vaporized.

Bear's picture

Amen ... vaporized is a good term

gulf breeze's picture

I am not angry.  I had my best year ever.  I made my year on ZSl.   please post some trades so we can fade.

slewie the pi-rat's picture

L0L!!!   tyler:   all fiat bets are off!

weak hands?  we're taliking fiat and fat-fingered FX follies & madness! 

sell the 30-year!  buy railroads? 

we don't want to get summarily executed, again! 

that robo_T is long on vapor, BiCheZ!

homersimpson's picture

Don't bother responding to Robo. He only trades after the fact, never before. The best Monday Morning QB ever on ZH.


YesWeKahn's picture

Ok, let's test Robo girl at little bit.

In 1 week, where will SPY be?

I say 116. Robo?

Stoploss's picture

Very good. You picked up on what i like to call hindsight trading, or myth trading. Notice how the stories contain all of the loosing bets as a group, which is regurgitated when the market reverses. Always on the right side of the bet. ;) Retards are funny like that..

buzzsaw99's picture

the eurotard bear raid makes sense. the eurotard mucketty mucks are too busy meddling in the sovereign bond markets and worrying about future bank bailouts and banning financial shorts to defend the broader stock markets. the bernank is too busy funneling money to his criminal cohorts to give a flying fig. even true believers are exiting the euro and buying usa treasuries or else buying german bunds.

s2man's picture

See ZH post, earlier today.