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
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.
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