Dow In Longest Losing Streak In 18 months: Greatest Short – Squeeze In The History Of The S&P Data

The Big Short ~ True Story

June 20, 2018

“Every dip is met by a wall of buying, ramping the market ever higher, and ever more ignorant of the increasingly…”

Editor’s Note Markets 101: If you “short” a stock, that means you sell a stock you don’t own. You do that because you think the stock is going to go down in price. Now, since you don’t own the stock, you are technically “borrowing” the stock to “short”. When the stock price drops, you buy it back to close the trade. Example (not actual): Tesla stock price is $100 and I think It’s going lower, so I sell it “short” for $100.

I must buy the stock back at a some point because I need to go get the share of Tesla I just borrowed. Sure enough, the stock price drops to $80, and I say, great – I’m gonna buy back that “short” now. So you sold a stock you didn’t own for $100, bought it back for $80, and you pocketed a cool $20 worth of profits.

This article is about a “short squeeze” which happens when the price is going up on the stock you have to buy back, so if that Tesla stock you sold at $100 now costs $120, you lost $20 and want to buy it back quickly because if it keeps going up in price, you lose even more money.

The “squeeze” comes in when there’s a crap-ton of people who sold Tesla short, they are all trying to buy it back, and since they’re are so many buyers needing Tesla stock, the price keeps rising, causing others who have shorted it to need to buy it back and so on and so forth in a feedback loop.

Now this is all the theory. “Margin calls”, “naked shorting of gold & silver”, and other stuff that takes place changes the dynamics, but hopefully this general explanation has helped somebody who doesn’t know what “short selling” is so they can better understand the markets.

from Zero Hedge

A quick glance at the stock market – particularly big-tech – and once can quickly discern that “something’s up.” Every dip is met by a wall of buying, ramping the market ever higher, and ever more ignorant of the increasingly uncertain world around it.

NASDAQ / DOW JONES DOJI

Why? Simple… it’s a massive, unprecedented short-squeeze… Big Short.

The “most shorted” stocks in America are up 20% in the last two months, almost incessantly. Corruption.

While the chart above is ridiculous enough, it turns out that this is actually accelerating and is now the greatest short-squeeze in the history of the data…

The ‘Relative Strength Index’ of the “most shorted” stocks has never been higher and each time it has reached this level, stocks have fallen hard.

But as a reminder – amid all of this – The Dow is down for the 7th day in a row, its longest losing streak in 18 months.

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