/biz/ - Business & Finance

>>21776846
Obviously, rallying stocks are bad for bears -- and that frequently pushes them out of the market at times that might be ripe for skepticism. Consider the internet frenzy 20 years ago. Back then, large speculators, mostly hedge funds, were net short on S&P 500 futures in all but five weeks in 1998 and 1999. Those mostly losing bets were completely squeezed out in 2000. That’s when the crash came.

The impact of short covering is particularly pronounced this time. A Goldman Sachs basket of the most-hated stocks has almost doubled since the market’s bottom in March, a gain that’s nearly twice as big as the S&P 500’s.


The recovery from 2020’s bear market has emboldened bulls among trend-following traders in particular, according to Charlie McElligott, a cross-asset strategist at Nomura Securities. The firm’s model that tracks commodity trading advisers, or CTAs, showed the group went “max short” on global equity futures on March 9 and has since seen $700 billion worth of short positions covered to now be net long.

After a five-month, uninterrupted rally, the market is starting to show signs of fatigue. While the S&P 500 rose in four of the past five days, none of the gains topped 0.5%.

“It felt more like a lack of desire to sell rather than enthusiasm to buy except for some select rotating pockets of the market that are still attracting speculators,” said Andrew Adams, a strategist at Saut Strategy. “We will just have to see if the S&P 500 hitting new highs wakes the market up and entices some new buyers to enter.”

— With assistance by Aoyon Ashraf, and Vildana Hajric