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Short Interest Slides As Market Squeeze Takes Victims

Tyler Durden's picture





 

A week ago we showed NYSE short interest, which in the aftermath of the massive slide in the EURUSD (the only real driver of beta these days, and with correlation at 1.000, also alpha), had soared to March 2009 levels. Naturally that left the market extremely exposed to any forced short squeeze, such as that witnessed 9 days ago when based on since refuted, but metastasized rumors, we saw a major flush higher in the Euro, and hence ES, which became self-sustaining once the short covering squeeze in stocks took over. Yesterday we got the latest NYSE short interest update and as expected, the shorts have dropped markedly with the number down from 15.7 billion on September 15 to 14.9 billion at the end of September. And since the SPY has moved from 110 to over 120 in the interim period, it is safe to say that when the next short interest update is released in two weeks, the number will be well in the low 14 billion range if not below it. The question is when the market will start pricing in the end of the short squeeze. Our estimate: at about the time when the EURUSD stops surging on hope and lies.

 


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Fri, 10/14/2011 - 09:44 | Link to Comment TradingJoe
TradingJoe's picture

so far 1220 is "holding" :))) I just wonder how many will go into the weekend holding their longs?!?! :)))

Fri, 10/14/2011 - 09:46 | Link to Comment spankthebernank
spankthebernank's picture

Its the kind of market that will make you lose your shiiiizzzzzz....

Fri, 10/14/2011 - 09:47 | Link to Comment qussl3
qussl3's picture

More than likely most will hold, especially since some nice "plan" will be preannouced pre close.

Fri, 10/14/2011 - 09:52 | Link to Comment alien-IQ
alien-IQ's picture

next week is options expiration week. /ES 1250 is virtually guaranteed...if not 1300.

also, AAPL reports earnings on Monday after close, which should push the market to another triple digit gain on Tuesday based on...whatever...

I can't wait til they release those edible i-pads.

Fri, 10/14/2011 - 10:34 | Link to Comment SAJ
SAJ's picture

a-iq -- LV have AAPL reporting on Tuesday AMC, not Monday AMC.  Might be worth checking if you're trading the earnings.  Best wishes. 

Fri, 10/14/2011 - 11:09 | Link to Comment dvsteenk
dvsteenk's picture

am i the only one thinking that Bloomberg has become one giant APPLE advertising?

options expiration, yes, but i doubt they'll take out 1250, they made their hit by reaching 1200 again and will probably keep it there

Fri, 10/14/2011 - 09:45 | Link to Comment eigenvalue
eigenvalue's picture

Markets have become crazy. As long as there are words from the lips of those bureaucrats in Europe, markets soar. 

Fri, 10/14/2011 - 09:46 | Link to Comment sabra1
sabra1's picture

all this is planned for the longs to get wiped out! the insiders are laughing and selling, whilst the HFT's cover for them!

Fri, 10/14/2011 - 09:46 | Link to Comment MiningJunkie
MiningJunkie's picture

As stated since early August, THIS MARKET IS GOING WAYYYYYYYYYYYY HIGHER....

CB printer presses on HIGH = higher stock prices - period end.

Cover them shorts, Tyler.

Fri, 10/14/2011 - 10:08 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

Barring some 'shock' event I really hate agreeing with you here. Truly deranged garbage going on but I don't think it'll pay to be short here... anywhere!

Fri, 10/14/2011 - 10:27 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Gee what sage trading insight you have. Then go all in.

The market (now a casino) goes up, the market goes down (same for individual stocks and bonds).

Buy low, sell high.  The song remains the same.

Fri, 10/14/2011 - 11:36 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

well, anything can happen, price-wize, in these "markets", rock-hound

tyler's (most?) recent market trading advice was:  use inexpensive straddles for the roller coaster risk on/off yo-yo

he may have intimated a PrimeX short, but the "market" for the synthetic is "illliquid"

we seem to have ringside seats for the biggest misallocations of assets and wealth in recorded history, keeping these fuking fascist-feeding zombies alive and marauding with CB fiat printing

but, the debt and the nannies de-incentivize and smother productive economic growth

and the "world economy" is almost entirely dependent on "financial aid" to attempt to fight off its own deflationary reckoning

good luck with your "sure thing" in the casino!

Fri, 10/14/2011 - 09:46 | Link to Comment CClarity
CClarity's picture

Feels like more than a short squeeze.  Could European CBs be buying US equities?  Euro QE not well defined.  And Timmy appears super satisfied and confident of something.

Fri, 10/14/2011 - 09:47 | Link to Comment Belarus
Belarus's picture

Sweet. It's almost time to go short then. This market is so top-heavy it's going fall on its own weight at some point. This is very bullish news for the bear case! Look at the 10 year! WOW! The stock market can't possibly think yields are surging because we've entered the next great growth phase can it? 

I love stupid markets. When I go short it'll be in the EFA though....

Fri, 10/14/2011 - 09:48 | Link to Comment alien-IQ
alien-IQ's picture

at this point, I wouldn't be surprised to see TPTB impose a 50% tax on shorting while offering a tax rebate for long positions.

Fri, 10/14/2011 - 09:48 | Link to Comment vote_libertaria...
vote_libertarian_party's picture

So European countries and banks will get bailed out by the EFSF...which will get funny money from the ECB....which will get funny money from the G20...which will get funny money from the IMF...which will get money from countries that are all running massive deficits.

 

Sounds like a solid plan to me...yepper.....buy buy buy

Fri, 10/14/2011 - 09:49 | Link to Comment sabra1
sabra1's picture

Treasury Secretary Geithner Tells CNBC: US Will Help Europe With Debt Crisis (Story Developing)

Fri, 10/14/2011 - 09:54 | Link to Comment alien-IQ
alien-IQ's picture

hence the dollar nose dive.

Fri, 10/14/2011 - 10:12 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

'dollar nose dive'

Hopefully the Chinese make this a recurring theme.

Fri, 10/14/2011 - 10:29 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Yeah, did anyone bother to tell the taxpayer?

Sure we will, a plan for a plan, for a plan, for a plan. Hedge accordingly.

Go ahead, send my gold and equities to the moon.  While it is always fun to buy low, you can't really do anything with the cash until you actually sell high.

Fri, 10/14/2011 - 09:49 | Link to Comment PicassoInActions
PicassoInActions's picture

hwo do you like this?

lets pay for europe

 

Treasury Secretary Geithner Tells CNBC: US Will Help Europe With Debt Crisis (Story Developing)

Fri, 10/14/2011 - 09:52 | Link to Comment spartan117
spartan117's picture

Tyler,

How's PrimeX today?  Need daily PrimeX doom.  Thank you kindly.

Fri, 10/14/2011 - 09:54 | Link to Comment afdestruction
afdestruction's picture

My eye is on the dollar, not the market...

Fri, 10/14/2011 - 09:54 | Link to Comment Melin
Melin's picture

If you please Sir, "we saw a major flush higher in the Euro, and hence ES."  Does ES stand for European Stocks? 

Fri, 10/14/2011 - 10:06 | Link to Comment SMG
SMG's picture

Stands for S&P 500 e-mini futures.   Basically he means a flush higher in the S&P 500.

Fri, 10/14/2011 - 10:21 | Link to Comment Melin
Melin's picture

Thank you...that's been a frequent source of befuddlement for me.

Fri, 10/14/2011 - 09:54 | Link to Comment sabra1
sabra1's picture

just before european markets close, the call for insiders to go short will be placed, once they close, north american markets will dive!

Fri, 10/14/2011 - 09:58 | Link to Comment alien-IQ
alien-IQ's picture

yes and when the dust settles and the volume evaporates, the magical levitation routine begins all over again and the market well get pinned at a HOD close as usual.

haven't you heard? the unicorns have come to save Europe, America and the entire world. All is well.

Fri, 10/14/2011 - 09:58 | Link to Comment disabledvet
disabledvet's picture

I don' know about "WAAYYYYYYY HIGHER." The Song Remains the Same: has the economy actually turned or not? The dollar is probably the easiest indicator--is this a retest or is it about to hit fresh lows? The fact is as the dollar strengthens short interest naturally soars as the problems with competitiveness prove some right (banks lose) and some wrong (Google soars.) The only thing that trasnlates into a general market move higher however is a strong economic recovery. That means one thing: jobs. Should Saudi Arabia and Iran start lobbing missiles at each other--well, have your bets placed accordingly of course...but I can't think of anything more bullish for domestic energy companies and production than that.

http://www.youtube.com/watch?v=DtVKz0rv4cg&feature=player_detailpage

Fri, 10/14/2011 - 09:56 | Link to Comment No Mas
No Mas's picture

What hope and lies?  The EU via the ECB/ESFS/IMF/US will deliver the reserves needed to their banks and the capital required of the member nations to see themselves through this tough spot.

The EU will emerge stronger and the euro will trounce the dollar.  Bottom line: Markets up.

Fri, 10/14/2011 - 09:56 | Link to Comment Lone Mad Minute...
Lone Mad Minute Medic's picture

You guys don't get it. There should be a zero hedge indicator that measures how negative this blog is and trade inverse to it. This market is going to keep going up until you guys get happy and go all in long. Until then get all the NFLX you can get your hands on. Stop being party poppers.

Fri, 10/14/2011 - 10:10 | Link to Comment alien-IQ
alien-IQ's picture

yeah...keep trading on that "hope" strategy. how can it possibly go wrong?

Fri, 10/14/2011 - 10:38 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Yes, at which point everyone get fleeced.  Damn sheep, won't all get into the corral.

Fri, 10/14/2011 - 10:00 | Link to Comment RobotTrader
RobotTrader's picture

All you gold hoarders should be cheering this rally.  Even though gold always lags on up days but leads on down days.

As I noted last week, intermediate lows are in.

Hey, if GOOG can make it to $700, maybe NEM has a shot at $70.

Fri, 10/14/2011 - 10:13 | Link to Comment Belarus
Belarus's picture

Here's some foresight for once on a Robo thread, but brought to you by me, re: since you are indeed correct "gold" is lagging to the upside and leading to the downside this spells only one thing: this is not an inflationary rally, which is the only thing that could truly lead this market sustainably higher. If it were an inflationary rally--you know, the one where the EFSF, ECB, and G-20 save all of Europe by flooding it with confetti paper--than Gold would be leading to the upside and lagging on the downside. 

This means a few things: one, short covering rally and a few large companies currently moving indices which won't be sustained, 2) Asia's economy is clearly in trouble which means 3) our economy is truly in trouble now that we have net redemptions in Tsy's while we need to plug a $4 trillion whole per year. In other words, how's that going to work out for you, especially the latter point? 

If I were a equity sheep, I'd be very worried with the lag in Gold. It means only one thing, the economy is about ready to hit a major burp in the road. 

Fri, 10/14/2011 - 10:27 | Link to Comment Belarus
Belarus's picture

Hey, Robo: notice financials turning "negative." while the market trys to hold? Hmmmmmm....I'm guessing you will not be talking about intermediate bottoms anytime soon by next week.

Fri, 10/14/2011 - 11:00 | Link to Comment gulf breeze
gulf breeze's picture

same for your bank trade but you keep pumping

Fri, 10/14/2011 - 10:09 | Link to Comment reload
reload's picture

Is it possible for mere mortals to get more up to date stats on the short interest? I gues `prop` desks can see what their firms customers positions are and set the algos loose to take them out. Fish in a barrell for those with the right data.

Fri, 10/14/2011 - 10:13 | Link to Comment New American Re...
New American Revolution's picture

I realize everyone has been looking at 2008 in comparison to 2011, and for good reason.   Both have a head and shoulders top, a sell off per the measurement of the head and shoulders; and as the equity markets rise approaching the 200 EMA as the markets did in 2008, we can expect consolidation for a few weeks, afterwhich, POW!, the market could well fall out of bed.    If this is the case, we can expect the lower indicators, MACD and Slow Stochastics to peak out during this 200 EMA consolidation.   Then sell with both feet and fists.

This rally should get the hedge funds through the end of the year so they can collect their bonus's and then run for the hills.    On the longer term charts, we can note that the low of 2008/2009 was a lower low than 2003, and 2011 is a lower high than 2008.     Getting back to technicals, this means we can expect a lower low in 2012.  

At this time, we can expect OWS to really catch fire as we move into the Spring.   American Spring that is.... I've got americanspring.co, everything else is taken except some of the more obscure.    Get ready to vote, even if Obama switches to Hillary from Joe Biden (unless he meets with an unfortunate accident, think Ron Brown, former Sec. of Commerce in small pieces), this Administration is going down.    But don't sell the Clinton's short, they've killed before for power before and they'd do it again.

In any event, I think we'll find 2012 a year of extremes, which makes Ron Paul a natural.   If I were him tho, I'd stay away from airplanes and take a bus. 

Fri, 10/14/2011 - 10:15 | Link to Comment LawsofPhysics
LawsofPhysics's picture

I love it, by decree of TPTB no one shall be allowed to profit from the forthcoming collapse.  Of course this is predicable behavior and so are my profits, thanks guys.  How about some more capital controls, go ahead I dare you.

Fri, 10/14/2011 - 10:39 | Link to Comment letitgo
letitgo's picture

A question for Tyler and other apparent fans of causal logic on this site (apologies for the over-simplification trying to convert it to logical propositions probably entails):

1) IF economic disaster IMPLIES money printing which IMPLIES PM prices up (how I understood Tyler's Twitter argument with Roubini and the general philosophy of the (many) PM holders on this board),

then why doesn't the following ZH style argument also hold true:

2) IF the stock market mostly cares about the health of banks AND governments are doing everything they can to help out the banks THEN the market will continue to rise so long as the governments move increasiblgy toward bank rescues and further away from letting banks fail (like they have recently with Dexia to much cheering from the market).    I was confused when I saw Tyler comment on a thread that Bank nationalisations are a reason to be short the market.  I would have thought that the need to nationalise banks might be a reason to be short, but the actual nationalisation of banks would be positive for the markets (increase in moral hazard / risk to reward ratio for banksters etc).

If (2) is broadly correct, then, given that governments have to find the money to nationalise from somewhere (and its most likely not going to come from creditor nations this time as you've pointed out), aren't we essentially looking at three alternatives:

a) Banks get bailed out, market cheers and governments print, so commodities rise relative to the USD/ EUR; or

b) Banks get bailed out, market cheers for financials, but governments don't print, but go for more austerity, so the market worries about retail stocks etc, probably leading to a flat market with less demand for real stuff meaning all commodities come off their recent levels; or

c) Banks don't get bailed out, the market tanks, we end up in a deflationary depression and everything goes down, including PMs.

In these crude terms, I'm essentially trying to work out how one can be long PMs and short the financials (the market) at this time, because I see the financials and PMs now moving together and my logic suggests that they will continue to move together over the short- to medium-term.  Long-PMs, short financials has been my partly ZH-inspired strategy over the past few months, but I'm considering abandoning it based on these thoughts.

Any help out there for me?  Thanks.

 

Fri, 10/14/2011 - 10:58 | Link to Comment adr
adr's picture

The only certain thing is that they will try to bail out the banks because it can not be let known what is on a single bank's balance sheet. The truth is a far greater problem than adding more debt to the debt pile. The truth is each bank holds enough off balance sheet debt to wipe out the entire global economy.

A, B, and C are all true. We were in A with QE2 and we are heading towards B, but the markets are still high off solution A and they think we will still get some of solution A.

The only way solution A is still viable is that all nations decide to abandon austerity and get downgraded together. All nations at B+ means the same as AAA because the bond money has to go somewhere. Solution B  doesn't really work because it doesn't increase the value of the equity market outside financials. Also if commodities don't rise that will be seen as a recessionary indicator. Every time we get decent statistics about the health of the economy, commodities surge leading to less discretionary money available in the economy. It doesn't make sense. I truly believe the "market" is trying to find the level of commodity pricing that is on the edge of sending the world into a depression but still low enough for mild growth. That point is the maximum level of profit, which all great criminal enterprises shoot for.

A leads to C which then leads back to A. You can make a lot of money as long as you are on the right side of the A to C and C to A trade.

So yes you can not be long PMs and short financials because the entire market is tied together. I know I am in the minority here when I say that C is correct and a collapse will send gold down to $200 an ounce. However, most people here who are gold bugs are buying gold as a way to preserve wealth after the fiat currency collapses in the hope that gold will be revalued on whatever system replaces it.

Fri, 10/14/2011 - 12:06 | Link to Comment letitgo
letitgo's picture

Thanks, ADR.  

You're right to read it more as an "expectation of (a), (b) or (c)" ruling the markets, not whether (a), (b) or (c) ends up the ulimate way we go.  There's no doubt that both expectation of printing (a) and expectation of either  austerity (b) or collapse (c) have taken hold of the markets in recent time and that expectation fluctuates.  This is what I was worried the conclusion might be: you can't take any long term position, you have to be nimble yada yada, which effectively means game over for the little guy against the big movers with tip-offs on short-term market direction from upstairs. 

We seem to agree that governments will try to bail out the banks, so must  disagree on whether they actually can if you're talking about option (c) -- and I'll take your word for it on that one.  The only reason I still see (b) as an option is because that's what I feel living on the European continent.  The Germans are paranoid about price stability and the ECB is very strictly regulated, so I can't see them resolving the problem the sneaky way through inflation as is the method of choice on the other side of the Atlantic.

What on earth, doing (a) in the US and (b) in Europe would do to the interlinked world markets is anybody's guess.  At that point, I imagine all you could do is look at your currency portfolio instead for a while.  Otherwise, you'd have to be throwing all your USD into PMs and all your EUR/CHF into shorts of the European market and thereby betting the house on a decoupling which just seems crazy given the thick web of international derivatives.

 

 

Fri, 10/14/2011 - 12:11 | Link to Comment LawsofPhysics
LawsofPhysics's picture

I'd agree with this and only add that anyone who holds anything of physical value, does so only because, well, they have something of physical value.  Most who hold gold, silver, and yes even copper coinage do so because it can always be traded, regardless of the system the replaces any fiat.

I think you are correct about the commodities game, especially since ALL commodities require energy input.  So really, this is an energy game, what is the right cost of energy that the criminals can extract without sending the world into chaos, but while maintaining the status quo.  Hence, it remains important to keep the ME and Iran in check.  Again, the song remains the same.

Fri, 10/14/2011 - 10:41 | Link to Comment adr
adr's picture

But the television keeps telling me stocks are cheap. Actually they could be right based on the Tesla earthquake machine moves in the market. The sine wave curve of the market keeps increasing in magnitude. We could actually hit 16k in the Dow only to blow up and dive all the way to 3000, then run up to 20k within a year, then back down to 1000 six months later. It makes total sense when you think of the market as nothing but a simulation run by a computer program.

Apple is pretty much bringing this market up. Other momo stocks like CMG aren't doing as well. You would think the "massive" beat in consumer spending would shoot CMG up 5%.

I really don't understand the relentless push to get the market back up to levels we know were bubble peak valuations. The "this time is different" mentality really is insane. but, but, but corporate profits. Yeah corporate profits based on firing as many people as possible and taking a massive increase in overseas profit on currency valuation. Sounds sustainable to me. Banks beating earnings on marking their own debt as profit, sounds like DOW 38k to me.

Either the consumer sentiment index is being manipulated lower or the retail sales are being manipulated higher. You can't have truth in both indexes. Everyone I know is cutting back on spending this Christmas. I don't live in NYC though where the yearly hedge fund bonuses can wipe out an entire toy store's inventory.

Fri, 10/14/2011 - 11:42 | Link to Comment s2man
s2man's picture

Why is it always a squeeze when something moves up, or down?  Its not a squeeze if you've bet the direction that market is moving.

Fri, 10/14/2011 - 11:45 | Link to Comment Augustus
Augustus's picture

I had a small short position on TSLA.  I was bought in this morning without any notice.  Is that how a squeeze works?

Fri, 10/14/2011 - 21:49 | Link to Comment paul_Liu
paul_Liu's picture

We shorts are fried in the last two weeks.

A lot of us has covered. It is a torture....

 

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