Historic Short Squeeze, Biggest In 3 Years, Sends Small-Caps Soaring; Dow Tops 17,000

In a strangely familiar case of deja vu all over again, stocks surged (alone in the cross-asset class world of economic reality) on the day before an FOMC statement. The Russell 2000 has had its best 10-day run in 3 years, best day of the year, and managed to scramble back to its 100- & 200-day moving-average. Dow 17,000 was another key technical level that was achieved. S&P 500 was levitated on volume around 40% below average into the green for October. VIX was banged under 15 and tracked stocks. Away from the equity-vol complex, asset-classes were unimpressed - HY credit, bonds, JPY, and the USD all diverged from stocks. USD weakened slightly, and commodities all gained on the day. TSY yields were up 2-3bps and HY closed practically unchanged. "Most shorted" stocks rose almost 3% - the biggest squeeze since Dec 2011 - smashing the Russell 2000 higher.

 

"Most Shorted" stocks (BBG Ticker GSCBNSAL Index) had their best day (biggest short squeeze) since Dec 2011...

 

Don't think it was a squeeze? spot the difference...

 

Don't forget the last time we were here, Bullard pissed in the punchbowl... Dow tops 17000 into close last minute!

 

Gentle reminder of the pre- and post- exuberance at the last FOMC in stocks... but not bonds... (just like we saw today)

 

On the day - volume was a disaster - so that means stocks soared...

 

The October miracle...

 

Off The Bullard lows...

 

Russell back up to its 100/200DMA...

 

HY credit diverged early then played some catch up but underperformed...

 

as did HYG at the close...

 

and JPY carry and Bonds decoupled from stocks too

 

Treasury yields rose modestly on the day, up 2-3bps on the week - bonds basically gacve back their 4ET-12ET gains from yesterday in the same period today...

 

The USD slipped lower (down 0.35% on the week) led by EUR strength (big SEK move on rate cut)

 

The weaker USD helped commodities...

 

Charts: Bloomberg

Bonus Chart: Divergences (almost) everywhere...

 

Bonus Bonus Chart: Where to next Janet?

 

Bonus Bonus Bonus Chart: The flip-flopping stock-gasoline world... and what do bonds know about a tumboing demand driven gas price plunge?