Those hoping that the recent short squeeze which took the market to just why of its 2012 highs will repeat itself may be disappointed, because according to the NYSE, Short Interest as of June 29 plunged to 14.2 billion shares, from well over 14.7 billion two weeks prior, a drop of over half a billion shares, or the most since January, when the combination of LTRO 1, Twist and renewed hope that the economy was "improving" forced 783K shares to cover into the big October-March ramp. The current short interest level of 14.2 billion shares is the third highest of 2012, and was last seen back in November 2011 when the market needed a global coordinated intervention and the ECB's LTRO announcement to prevent i from taking out 2012 lows.
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Not helping things was the just announced latest weekly update from the ICI, showing that in the week ended July 4, another $3.1 billion was withdrawn from domestic equity mutual funds. Traditionally, retail outflows have been a contrarian indicator, but not in the new normal, in which there have been virtually no mutual fund inflows at all. Indicatively, YTD $62.6 billion has been pulled from equity mutual funds, compared to $21.5 billion in 2011.
Is the level of confidence in the stock market this year 3 times less than last? Sounds about right.
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For the sake of all those mutual fund managers, we hope all that European money market cash which is no longer welcome courtesy of ZIRP, rotates into fund AUM, or else ongoing redemption requests by an aging investing population can only be met with ever more asset liquidations.