Displaying items by tag: short squeeze

(Los Angeles)

Tesla’s stock has been rising almost as fast as Elon Musk’s rocket ship ambitions. Not only is the stock up almost 100% this year already (!), but shares rose by a shocking 20% on Monday alone. Why? The lack of a concrete reason is what makes the move alarming. There was some relatively minor news from a supplier about battery prices, but otherwise nothing. That is making many traders expect that a short squeeze has hold of the market, making gains artificial and moving the stock dangerously away from its moving averages.

FINSUM: Tesla shares seem to be showing a high degree of irrational exuberance right now. Any bad news could cause a huge drop.

(New York)

One of Wall Street’s favorite trades has gone down the tubes this year, and for a classic reason. One of the hottest trades of this year has been to short ten-year Treasury bonds. Many institutional money managers believed that the bonds would see their yields rise and prices fall as the Fed raised rates and the US continued to grow at a quick pace. However, the opposite has happened recently, and ten-year Treasury bonds have seen their yields fall from well over 3% to just 2.83%. The reason why is a short squeeze. Short interest in the bonds rose from a net short position of around 75,000 futures contracts at the beginning of the year to almost 700,000 now.

FINSUM: We think there are a lot more factors keeping yields low than a short squeeze, but it is definitely a considerable component.

(New York)

There has been a lot of fear about bonds lately. Higher inflation readings, a more hawkish Fed, and 3% Treasury yields have gotten investors nervous. However, bonds might be in for some big gains, especially Treasuries. The reason why is that there is a huge pile of short positons held by hedge funds who are betting against Treasuries. Yet, yields have been stubborn over the last couple of weeks and now it appears the positon might be broken by a strong short squeeze that would send prices higher.

FINSUM: We had not paid much attention to this, but given the weak US inflation reading that has just been released, this may play out very soon.