The “most shorted” stocks have fallen for 6 of the last 7 days, dropping almost 6% – the biggest in 3 months – as the S&P 500 fell just 1%.
Year-to-date, ‘shorts’ are outperforming with “most shorted” down 3.3% compared to the broad market’s unchanged return.
As Credit Suisse noted, short squeeze pain appears to be abating… 3 data points suggest shorts are re-establishing themselves:
- Our short basket in energy today underperforming by 60 bps… materials short basket underperforming by ~100 bps
- Prime service data —Losses associated with the covering of crowded energy shorts appears to be slowing as measured by the recent Outperformance of the top 100 shorts driven by Energy shorts, a first in 2016 –Connors Prime Services
- Futures desk — EU equity shorts, after being squeezed for several weeks, re-established themselves in a big way last week as we fell back through 3000… US equity shorts also increased as macro figures disappointed –Glanville
Of course only one thing really matters… The Fed’s “concerned-ness” level…
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