Hedge Funds Steamrolled By Massive, 98%-ile Short Squeeze: What Is Causing It And How Long Will It Last?

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by Tyler Durden
Tuesday, Jan 17, 2023 - 08:04 PM

Last Monday, we showed the latest JPM prime brokerage data, which revealed that "high SI stocks in the US have seen a ~6 week period of persistent short additions. The magnitude and duration of these short additions is on par with the largest we’ve seen in past years and the cumulative additions put shorts in these types of stocks back at multi-year highs."

This striking observation of near-record shorting by hedge funds, prompted JPM to muse that "given the consensus bearish view of Equity markets, driven by expectations for the Fed to hike us into a recession, a sharp squeeze would catch a number of investors offsides" and conclude that "we are setting up for a tech-led squeeze higher as shorting gets extreme."

That's precisely what happened next and as shown in the chart below, the Goldman most shorted basket erupted almost 20% higher in just the past week!