Small Caps Soar On Biggest Short Squeeze In 7 Months, Bitcoin & Bond Yields Spike

On the back a fourth straight day of short-squeeze – the biggest since January’s peak (all thanks to a massive bank buyback scheme being unleashed with perfect timing)…

Source: Bloomberg

Which helped send Small Caps ripping higher on the day (though notice how it appears the squeezers ran out of ammo late in the day again)…

One thing to note – by the close, “Most Shorted” stocks had actually turned negative on the day…

Source: Bloomberg

Is the squeeze over? Did buybacks just run out of power?

Source: Bloomberg

After Nasdaq hit 15,000 (for the first time) yesterday, S&P 500 hit 4500 for the first time ever today…

And yet “Fear” remains high…

Source: CNN

And that ‘fear’ is being driven by the plunge in breadth…

Source: CNN

Of course, the world his pet rabbit is anxiously awaiting Jay Powell’s every utterance on Friday…ultra short-term puts massively bid and OTM calls (everyone is buying straddles – expecting Powell to spark some chaos – with slight downside protection skew)

Source: Bloomberg

…Will he, won’t he? The following brief clip sets the scene…

The big bank buyback scheme has lifted financials strongly on the week but energy stocks (squeezed) are the big gainers as Utes lag for now…

Source: Bloomberg

Treasury yields recoupled with stocks on the week after last week’s massive buyback scheme…

Source: Bloomberg

Treasury yields spiked early but hit critical resistance at last week’s UMich plunge, ran those stops and reversed lower…

Source: Bloomberg

Today saw weak bond longs fold and the yield curve steepen significantly as the long-end underperformed…

Source: Bloomberg

The dollar index pumped and dumped on the day to end unchanged…

Source: Bloomberg

Crypto rebounded as the stock short-squeeze started (and notably tech stocks went nowhere). Bitcoin bounced off around $47,000 support today…

Source: Bloomberg

WTI extended gains today, rallying back above $68…

Gold slipped back below $1800…

 

Finally, not only is breadth ugly, but trading volumes are slumping as stonks rally to the moon. The 50-day average daily trading volume across all members of the S&P 500 Index has declined to just shy of 2 billion shares, the lowest since the coronavirus pandemic first began to roil markets in late February 2020.

 

Source: Bloomberg

While August has historically been one of the quietest periods for trading, the equity benchmark’s average volume this year is still below its 10-year average for the month and is set to be the lowest since 2018… so who’s buying?

Whoever it is, they aren’t stopping – it has now been 10 months since the S&P suffered a 5% drawdown or greater…

Source: Bloomberg

Minsky is ryely smiling from his grace…