As if it won't climb back to above 30k within the next week. I'll eat my words if that doesn't happen.
This is caused by the short squeeze on GME. Hedge funds are withdrawing from traditional investments to cover their losses.
This will likely ramp up in the coming days. Today is the first day that GME short sellers have to begin paying interests in their shorts.
If GME short-to-float doesn't radically change today, this will be worse on Monday. If it doesn't change my Monday, it'll be worse Tuesday.
All the evidence I have seen points to hedge funds struggling to cover their shorts. I don't expect the short-to-float to drop much soon. This to continue for a long while.
I’d contest this a bit. Think that’s overestimating the scope of the short covering/liquidity crunch. I think this is a combination of boomer retail investors getting spooked and trimming positions (lots of narratives saying this is the speculative signal of a market top) and bad vaccine news. But a lot of positions getting closed out into the weekend too.
Think that’s overestimating the scope of the short covering/liquidity crunch
The short covering seems to be the bell-weather in the market. The past three days have been volatile, and the only day there was upwards volatility was yesterday, when the situation for short sellers was at its peak.
The liquidity crunch on GME nearly triggered a financial collapse yesterday. When clearing houses intervened, all indices made a comeback. However, that hope was short-lived. The market manipulation yesterday only enabled hedge funds to recover 6% their short position.
Now, hedge funds have largely given up on covering their shorts. They are buying long positions to profit off the squeeze, and cover the interest on their shorts. As the squeeze continues - which, there's no attempt to end it - the indices will continue to struggle.
This is a ticking time bomb that will wipe out the financial system. In the short-run, I'm expecting investors across the board to flee traditional indices.
Yesterday indices opened up and rose until about 2pm and then sold off into the close.
(Edit: if the robinhood stopping GME buy orders need came out before market, so I stand corrected on this)
Agreed about clearing and counter party risk almost causing the bomb to go off. I think markets are spooked but most people don’t realize just how serious clearing issues were, and how close we came to firms collapsing
By "a long while" are we talking about a month after the majority of the short positions are closed? A ~2% dip in the Dow in one day is just small enough to not really be that big of a deal in isolation if the previous upward trend continues but if this goes on for at least a week (2% lost every trading day for 5 of them translates to a 9.6% drop) without quickly bouncing back I can see your angle.
if this goes on for at least a week (2% lost every trading day for 5 of them translates to a 9.6% drop) without quickly bouncing back I can see your angle.
This is my expectation. It seems the bell-weather for the market is short sellers' ability to cover their losses. But their position will continue to look worse and worse for awhile.
Democracy has not just entered the markets but taken control of a portion of the market.
Unelected finance managers with way too much power deciding where capital goes are properly shitting themselves.
