Markets stocks

Nomura’s McElligott On ‘Unprecedented’ Short Covering And A ‘Perverse’ Local Risk

"All's well unless"...

"Futures positioning [is] now mattering in a big way for US Equities", Nomura's Charlie McElligott wrote Monday, flagging massive covering in what was a 0.1%ile Leveraged Fund net short position. This "unprecedented cover" (as Charlie dubs it) was +$23.9 billion across S&P, Nasdaq and Russell futures. Nomura calls the buy/buy-to-cover in Nasdaq and S&P futs "particularly extreme", in the 100th%ile and 99th%iles, respectively. "The surge in short-covering comes as traders wrestle with what to do after a pause in one of the most unloved rallies in recent financial history", Bloomberg wrote Monday, documenting the same action, and adding that "short interest as a percentage of shares outstanding in SPY had fallen to 4.9% Friday from 6.7% at the end of May". If you're wondering whether the market is still vulnerable to "chop" as it was last week post-Op-Ex, the answer, according to McElligott, is yes. "The market remains open to gappy moves into the final days of the 'post June Op-Ex seasonal drawdown window' which we have called accurately since June 1st", he says, noting that "after the blast lower last week, we see Dealer positioning remain firmly in 'short gamma' t
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2 comments on “Nomura’s McElligott On ‘Unprecedented’ Short Covering And A ‘Perverse’ Local Risk

  1. joesailboat says:

    Better earnings is a perversion the labor market/consumer can live with.

  2. Vlad is Mad says:

    the whole market is one giant perversion—see James Grant in WSJ

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