This Is What Late-Stage Squeezes Look Like
From strong to extreme
Positioning has flipped fast, with systematic buying, short covering, and aggressive upside flow all hitting at once. Several metrics are now pushing into stretched territory, suggesting the move is no longer just a squeeze, but starting to stretch.
Flows are still driving the tape, but the setup is getting crowded and more sensitive to any shift.
This is starting to overshoot.
The squeeze
DB called the squeeze well when they flagged this chart near the recent lows. We’ve now moved into overshooting territory.
Source: DB
Still in buy mode
The market remains firmly in buy mode. Systematic strategies have added roughly $135bn of global equity index futures over the past two weeks, and, assuming no major shift, another ~$50bn could follow in the coming week. At the same time, discretionary players have been covering macro shorts and still have more to unwind. Higher prices are still inducing more buying. (Tony P)
Source: GS
Risk controlled players
Risk Control has not been a meaningful buyer yet, with exposure flat week-over-week, held back by elevated realized volatility.
If the pace of the move higher slows, Risk Control could step in, with potential buying of around $185bn over the next month, assuming SPX averages +/-50bps daily moves, writes UBS.
Source: UBS
Fragile upside
Dealers flip meaningfully short gamma on a 1–3% move higher, which would force them to buy deltas into the upside.
Source: GS
Expect more erratic moves
April OPEX was heavily skewed toward calls, with nearly 90% of S&P 500-linked volume concentrated in upside positioning.
With Friday’s expiration now behind us, the setup shifts in two key ways. First, the removal of those call positions strips out a major source of upward pressure. Second, dealer gamma flips to a more neutral-to-negative stance, increasing the likelihood of looser, more reactive price action in the sessions ahead. (Spotgamma)
Source: Spotgamma
Calls vs puts
Call vs. put volume has surged to the upside, now sitting in the 95th percentile since 2010.
Source: DB
Mega in mega
Net call volume in mega caps and tech is massive, starting to feel a bit like the NASDAQ whale again over the past week.
Source: DB
Desperate upside
Investors are getting desperate to chase the melt-up. Call skew has exploded higher, showing strong demand for upside exposure. That’s pushing vols higher on low delta calls… making call spreads relatively attractive (from a vol point of view).
Source: GS
Upside is the new downside
SPX and MAG upside skew has exploded to the upside. Right tail fear is the only fear in town.
Source: Nomura
Inverse fear hitting hard
Skew is collapsing in spectacular fashion as the squeeze continues, with inverse fear clearly taking hold.
This is one of those “under the hood” signals worth watching closely… it tends to show up when markets get stretched.
This is what late-stage squeezes look like.
