Earlier this month we reported that the move higher from the February lows was not only the result of the biggest squeeze ever – something that had been known before – but that something surprising had emerged: according to JPM’s Prime Broker desk, it was only ETF covering that was driving the squeeze as recently as of the end of March.
To follow up on this, a massive short squeeze continues to prop up the market with yet another move higher throughout April.
Courtesy of the latest report by JPM’s Prime Brokerage, we now know two reasons why there was such a large move in April. Hedge funds accelerated the pace of ETF covering, only this time single stock names have also joined the party. In other words, ETF covering is removing hedges, and single stock covering is getting HF’s into a net long position.
JPM also notes that HF net long exposure is now above the 12 month average, and although the “smart money” is typically in the know on such things, it remains to be seen just what the catalyst will be that pushes markets higher, especially in the face of a dismal earnings season, especially when considering that the very same smart money is, according to Bank of America, selling stocks for a record 13 consecutive weeks..
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