Fra Zerohedge:
US equity markets are soaring once again and two things are driving it: CTA-driven short-covering in commodities and the algo-driven squeeze of the most-shorted stocks. Having risen 13 of the last 16 days, “Most Shorted” stocks are now unchanged since The Fed rate-hike, soaring 25% in that time – the biggest squeeze in history. And Credit Suisse warns, it could get worse as the dash for trash goes on, and on, and on….
Behold: the biggest short-squeeze on record:
And here’s why:
But that punchline for those who are caught on the wrong side of this epic squeeze and dry heaving violently is that as JPM warned over the weekend,”The Most Painful Part Of The Short Squeeze May Be Yet To Come, JPM Warns“, and just moments ago Credit Suisses joined the call saying CTAs could create a similar dynamic to stocks in the Oil market.
Commentary from Martin Glanville, our London-based Head of Futures, as it relates to CTAs and Oil positioning. He pointed to the squeeze in Iron Ore and thinks the CTAs could create a similar dynamic in the Oil market.
As much complexity exists in CTA models, there’s also a tremendous amount of simplicity when it comes to how they exit long-held positions. As Oil trades through $33, we’re seeing the first signs of short covering by the CTA community.
The next pressure point if we continue to squeeze should kick in at $40, as stops will have been lowered on the way down for their medium-term models.
Don’t be surprised to see a 1-day +10% squeeze in oil or +$5-day – as long held shorts are triggered in a short space of time.
The big boys aren’t waiting to find out if JPM and CS are right and futures shorts are covering in size:
