No bears left!

The Market Ear with more on how far the bear market rally has run to correct market positioning.

Short covering getting extreme as net US hedge fund flows turn positive. JPM writes: “…the short covering has been the main driver of late and is now one of the most extreme in the past 5 years on a 20d basis (-3z). The covering has pushed net flows into more positive territory as well.”

JPM PI

Sucking people in

Low volume, poor liquidity market continues sucking people in. Good luck explaining to the boss you missed the entire squeeze and continue to “believe in your shorts”. The post CPI print px action is well described via Goldman’s prime book: “…the overall US Prime book saw the largest $ net buying in more than 3 months (1-Year Z score +1.8), driven by long buys as well as short covers….Info Tech stocks saw the largest $ net buying since 6/24 (Z score +1.1)”. We are getting closer…

GS PB

It will squeeze until…

According to Citi we will squeeze until:

1. Fed “reasserts itself and is forceful in its pushback to looser financial conditions”

2. the overall economy starts to get weaker which will feed into lower EPS expectations

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.