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It's Not Over: EUR Shorts Barely Budge, Leading To Concerns For Another Levered Squeeze

Submitted by Tyler Durden on 10/28/2011 16:02 -0400

Last week we warned of the possibility for a massive short squeeze melt up purely due to the fact that the most leveragable driver of the stock market, the EURUSD, had barely seen a change in net short positions despite recurring noises that Europe would somehow pull a magic money tree out of the hat and all should be well. Well, they pulled it, and the EURUSD soared over 300 pips. There is one problem, however: as the latest CFTC Commitment of Traders update indicates, there was barely any change in net non-spec EUR bearish bets which remained stubbornly fixed near the 2011 highs, at -76,512 contracts, just off the prior week's -77,720. Granted the USD net long dropped yet again, from 41,751 to 32,110 contracts. But the one all important driver for yet another potential squeeze has hardly budged. The one saving grace: this data is as of October 25, just before the massive rip started. As such it is possible that a substantial portion of these shorts has covered. Alas, we won't know until next Friday. By then, weak hand bears, spooked by merely the possibility of another ramp, will likely continue to cover into any even modest dip. It won't be until this total short position moves materially higher that the chance of any material downtick in the market will reappear.

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Fri, 10/28/2011 - 16:03 | 1822379 Biggvs

Some weak hands might be folding, but some of us are also adding to EUR shorts.

Fri, 10/28/2011 - 16:13 | 1822425 SheepDog-One

Damn straight, maybe people are just saying 'we call your bluff, go ahead and pump, we're not covering'. Pay, suckers.

Fri, 10/28/2011 - 16:55 | 1822589 EL INDIO

Another possible explanation is that the shorts covered when the Euro started surging then re-established their shorts at higher levels just like the bullion banks do with Gold and Silver. So the high short position might stay high until the Euro drops back to entice short covering (for a profit).

Sat, 10/29/2011 - 10:50 | 1824137 Quinvarius

You know what is more likely? The Dollar is still the weakest currency and bottom feeding it is still suicide.

Fri, 10/28/2011 - 16:04 | 1822382 SwingForce

Aw come on, you know better than to present this as Fresh News.

Fri, 10/28/2011 - 16:04 | 1822383 jdelano

If these guys have stayed in this long, don't think you'll see much covering until 1.32

Fri, 10/28/2011 - 16:04 | 1822384 Manthong

http://www.youtube.com/watch?v=S8H2FIf1oH4

Fri, 10/28/2011 - 16:07 | 1822397 Belarus

A lot could be mere pair trades: short EURO/Long US stocks. If EURO goes down, so too stocks and vice versa. Could be some protection cover for long trades....that won't get covered much unless stocks get unwound.

Fri, 10/28/2011 - 16:08 | 1822402 Darth Sidious

what % of eur/usd trading occurs in futures contracts governed by the cftc? i'd think its pretty small. Not sure this shows much.

Fri, 10/28/2011 - 16:17 | 1822444 sabra1

don't they have a CDS for that?

Fri, 10/28/2011 - 16:10 | 1822408 sergei

Ken Rogoff calls Europes austerity solution implausible

http://www.youtube.com/watch?v=ESIZMkKLBF4

Fri, 10/28/2011 - 16:13 | 1822423 bob_dabolina

I'm short eur/usd

I don't see the need to cover.

Can someone give me a reason other than that shorts haven't covered?

Fri, 10/28/2011 - 16:16 | 1822437 SheepDog-One

Hell, Im thinking about jumping in with you, and I dont trade currencies! Slam dunk, at some point here the Euro-phoria dies suddenly.

Fri, 10/28/2011 - 16:21 | 1822455 Black Forest

at some point here the Euro-phoria dies suddenly

The EUR might die suddenly also at EURUSD = 1.7 or 2.0 or 2.3. Nothing is impossible.

Fri, 10/28/2011 - 16:24 | 1822463 bob_dabolina

or 10.0, or 11.0 or infinity!

Fri, 10/28/2011 - 16:22 | 1822456 malikai

I hate running into flamethrower. I think it's better to let it run out of gas first.

Fri, 10/28/2011 - 16:24 | 1822462 LawsofPhysics

agreed. look we all know this is a race to the bottom, let a few more currancies catch up or get (more) desperate

Fri, 10/28/2011 - 16:28 | 1822471 bob_dabolina

Ok...so when is this going to be?

Or is everyone going to time this perfectly and come on ZH and brag about how smart they are (after the fact)?

Fri, 10/28/2011 - 16:35 | 1822515 malikai

Personally, I want to see spec shorts drop. Then I want to see my tools tell me we're about to turn. Then I'll get in short.

For now, I'm standing by and hoping gold and silver don't go parabolic again attracting more margin hikes.

Fri, 10/28/2011 - 16:38 | 1822528 LawsofPhysics

"hoping gold and silver don't go parabolic again attracting more margin hikes."

Thought the same thing and closed some positions today. I am going to sleep, damnit. Maybe buy another coin just to here it go "clink".

Fri, 10/28/2011 - 17:14 | 1822685 Ghordius

"clink"
Sounds good!

Fri, 10/28/2011 - 16:42 | 1822544 bob_dabolina

Are your tools giving you any entry points?

Fri, 10/28/2011 - 17:17 | 1822699 malikai

I'm afraid not. I don't get entry points. I get imbalance and divergence signals.

Sat, 10/29/2011 - 00:16 | 1823695 Rick64

Good advice.

Sat, 10/29/2011 - 04:28 | 1823906 bob_dabolina

[rolling my eyes]

Fri, 10/28/2011 - 16:36 | 1822518 LawsofPhysics

Don't know myself, I got happy last friday after getting creamed on a couple positions that broke chart trends in a big way. Enjoyed the pop, covered and took home some dough so I can sleep and fight again next week. This is a hobby for me, the business is running smooth for now. I give that another day at most. I'll work the weekend and play a bit more next week. I think the Euro debacle can now continue until June at least. The Americans have to deal with the "super" committee. In that regard, many of them may return from a happy holiday to find limits on how much they can take out of their bank accounts. I think the super fucks can conspire to look busy doing nothing and keep us range bound on the high side until December. That's all I got, really.

Fri, 10/28/2011 - 17:18 | 1822703 Ghordius

I think we have EuroDebacle until 2016, at least...
Those little itsy bitsy teeny weeny things don't get quick solutions...

Fri, 10/28/2011 - 16:34 | 1822507 NOTW777

one mild caution; possible inverse H & S - neckline @ 1.3937ish, head near 1.3150ish. yesterday's pop broke the neck hard. if it would play out, 1.46ish or higher is possible. i acknowledge its a rough pattern (right shoulder questionable); one or more headlines could reverse it in a hurry. shorts would like to see the neck recovered. maybe I'm seeing things that arent there

i own some EUO

Fri, 10/28/2011 - 16:39 | 1822535 LawsofPhysics

unless you programmed all algos in play and are Ben Bernanke, you definately don't know what's there.

Fri, 10/28/2011 - 17:28 | 1822762 Stoploss

bob, 1.45 is the majic number.

It is WHO is short, versus WHO is long. The large traders are long usd, and short eur. The commercial hedgers are long the eur and short the usd, bigtime. Which is why the staying power, hence, there are no big shorts left, just the large traders, commercial longs outweigh the LT shorts by 2:1.

This stance is generally inverse, which in and of itself is worrysome to say the least, because if the CH's get tired of being long and wrong on the eur, a simple selling of the eur will send it below 1.30 in a hurry. Inversely if they are short and wrong on the usd, those are the shorts that will be covering, not the eur, follow me?

If the CH's cover their dollar shorts, and sell the eur, it's a wash of sorts, but will absolutely monkey hammer the commodities complex. Again... Which is what needs to happen to head off 5$ gas by Thanksgiving. Black Friday would take on a whole new meaning with 5$ gas going into Christmas, by killing the retailers even more than they are now.

IMHO your safe, for a while at least.

Fri, 10/28/2011 - 16:14 | 1822426 BW

Sure seemed like capitulation yesterday

Fri, 10/28/2011 - 16:16 | 1822435 moldygoat

Danerics wave counts have been spot on for a while lately, anybody follow? I am liking the upside targets before the next big drop. Whats the number of Fib days untill the dumb money falls back asleep?

Fri, 10/28/2011 - 16:17 | 1822440 undercover brother

euro shorts undoubtedly declined during that rip. i'd be shocked if they didni't. The upcoming COT should be rather intersting

Fri, 10/28/2011 - 16:34 | 1822441 Pretorian

No matter how grave situation in Europe is if 2 many people are short Euro then Interbank ECN members Goldman,BOfa,City, RBS , UBS... can move the market like no one in opposite direction to pocket the losses from ordinary people. Thats what I am calling organized crime syndicate ALKAPONE. Collecting money for Obama campaign and there expensive night club escort girls. Run the C++ code to destroy every FX.. CFD.. lizard in town.

Fri, 10/28/2011 - 16:20 | 1822451 citrine

Anyone who has grown fond of the euro crisis has little to worry about: it’ll be around a while yet.

Stephan Kaufmann - - Freelance journalist, who writes mainly for Berlin daily Berliner Zeitung and Tageszeitung. Specialised in economic issues.

Fri, 10/28/2011 - 16:23 | 1822457 sabra1

NYSE price mix-up on more than 1000 ticker symbols exaggerates price swings for some stocks

Fri, 10/28/2011 - 16:25 | 1822464 trampstamp

What would be the reason behind that?

Fri, 10/28/2011 - 16:36 | 1822520 sabra1

http://finance.yahoo.com/news/NYSE-price-mixup-causes-apf-3216824449.html?x=0

Fri, 10/28/2011 - 18:45 | 1823005 flacon

"A technical glitch caused NYSE Euronext to release incorrect price information.."

Australia stock exchange was closed the other day due to a "technical glitch" - and don't forget May 6th, 2010 "technical glitch".

FOR JUST $19.95 GET NOT ONE, BUT TWO BOTTLES OF "technical glitch" CREAM FOR FREE! CALL NOW!

Fri, 10/28/2011 - 16:25 | 1822465 LongSoupLine

I, for one, do NOT underestimate the power, corruption and manipulative depth of the global shadow banking cartel. This is cat and mouse at its best. Engineered to perfection to enrichen a few at the expense of many.

Fri, 10/28/2011 - 16:33 | 1822502 sabra1

the best way to enrichen , is to wait until everyone is long, as they are now, then, BOOOOOOOOOOOM!!!!!!!!

Fri, 10/28/2011 - 16:31 | 1822487 Yen Cross

It's over Tyler! End of month flows and kaBOOM! The market is neutral, at best and the usd is over sold.

Fri, 10/28/2011 - 16:32 | 1822492 melanie

I'm short eur/usd, and although my position is not profitable at the moment i see no reason to cover. I don't trade short term, my goal is to keep my position untill March 2013.

Fri, 10/28/2011 - 16:34 | 1822509 BW

http://www.aaii.com/sentimentsurvey/sent_results

AAII most bullish since July 7

Fri, 10/28/2011 - 16:36 | 1822523 FunkyMonkeyBoy

Ben Shalom must be wondering why the $dollar is going to sh*t against the EUR... just imagine what will happen to the $dollar when Ben set's his printers to max speed.

The criminal filth b*stard he is.

Fri, 10/28/2011 - 16:59 | 1822607 Fibz

You actually think he's surprised the dollar is dumping? Thanks for the laugh.

Fri, 10/28/2011 - 19:24 | 1823115 reload

Those who think the ECB will not print could be in for a surprise sooner rather than later. If I am right on that, my guess is that risk takes a leg higher and decouples from the euro/use pair.

Fri, 10/28/2011 - 16:37 | 1822524 Mark123

Don't worry, be happy....everything is just fine. Here are the big three reasons we are safe:

1. China will continue to expand at a rapid pace and we will all get rich selling them stuff....expecially raw materials.

2. China will use its accumulated vast wealth to prop up bankrupt countries

3. If something bad happens the Fed will print

oops...looks like #1 and #2 might be in jeopardy:

http://globaleconomicanalysis.blogspot.com/2011/10/shanghai-homeowners-s...

So then the Fed will print....print us all the way to utopia!

Fri, 10/28/2011 - 16:42 | 1822541 LawsofPhysics

For what it is worth, I am still selling a lot of soybeans to China and my energy prices for the chicken houses just jumped big time. They like chicken too.

Fri, 10/28/2011 - 16:48 | 1822551 Pretorian

The fact a China is ready to help bancrupt EU is irrelevant if 2 many traders take short position on currency. Then the currency run opposite, so big ECN members can pocket the money , your and mine loss. Thats how so calledd "FX market"casino works for a decade, now they have expensive C++ codes .

Fri, 10/28/2011 - 16:42 | 1822543 gringo28

duh. when you've got a bunch of "traders" who think Jom Chanos is God and can't see more than five minutes in front of them, of course they are still effectively long the USD. it's unbelievable that folks continue to peddle this strong USD meme without even batting an eye lash at the obvious: a strong USD will kill any recovery in the US and until the USD is measurably weaker against commodity currencies, you will not see unemployment come down. all of the centrla bankers get this, why can't traders? oh well. i'll stick to my materials and copper and silver and blue chip exporters.....

Fri, 10/28/2011 - 16:44 | 1822550 Yen Cross

So you like crude over 90?

Fri, 10/28/2011 - 16:57 | 1822596 lizzy36

Paradox.

$4 a gallon gas kills recovery. Weaken curreny more for export growth and $5 a gallon will kill the US.

So there is a fine line between how much weaker the currency can get, without killing any hope of a recovery.

The US DOES NOT work on $100 oil. Period.

Fri, 10/28/2011 - 17:34 | 1822715 lizzy36

dupe

Fri, 10/28/2011 - 16:44 | 1822548 adr

Today the volume was pathetic and on pathetic volume days the effects of the Algos can be seen clear as day. Look at the price movement in the charts, once again it looks like a seismographic during an earthquake.

The algos were playing for pennies today since there were no headlines to catapult the market in wither direction. To think Cramer actually was on a segment a few weeks ago talking about how broken the market is due to HFT. I guess 20% up in three weeks changed his view on that.

At least for some reason gasoline dropped to $2.25 today after being $2.55 yesterday.

Sat, 10/29/2011 - 00:31 | 1823722 TonyV

At least for some reason gasoline dropped to $2.25 today after being $2.55 yesterday

What?!

Fri, 10/28/2011 - 16:55 | 1822581 hack3434

Jeff Neilson sayd GLD Shareholders are doomed after 11 11 11

Fri, 10/28/2011 - 16:55 | 1822588 Comay Mierda

maybe whats going on is china + every european bank is selling dollars to prop up the european debt ponzi scheme. so its not the euro thats strengthening its the dollar thats weakening. weak dollar = higher SPX. and much higher GOLD

Fri, 10/28/2011 - 18:51 | 1823026 NOTW777

more euro unity

http://www.breitbart.com/article.php?id=CNG.78bd1932c8482f7cb8afcbc74550...

Fri, 10/28/2011 - 22:33 | 1823505 euphoria