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 continues.
The biggest short-squeeze on record…
And here’s why…
And it may get worse as CTAs Trigger a Squeeze? Iron Ore +20% – CTAs could create a similar dynamic 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.
Futures shorts covering in size…
via Zero Hedge http://ift.tt/1TmBR4i Tyler Durden