We have highlighted this before but given the incessant rumblings that everything is fixed and that nationalizations, recaps, and EFSF votes are 'positive', we thought a reflection on what is really going on would be useful. The mother of all short squeezes as we mentioned recently continues - catalyzed by the since refuted FT Rumor of a pan-European bank recap 'plan'. The fact that Short Interest is at its highest since the "generational lows" only helps.
The red line is the Goldman Sachs most-shorted index from the Russell components and the green line is the Russell 3000. Note the impressive outperformance (+9.9% vs 6.8%) since the FT rumor of the 'short' index - while not foolproof, certainly a good sentiment indication that shorts have been highly uncomfortable.