This is one major way hedge fund have changed the market landscape. Because they do get massively short from time to time, when a key resistance level is broken, especially one that has held for a long time, panic short-covering and then panic buying outright result in the upward explosion shown above in the daily chart of the Dow Jones Industrial.We've been stuck in the 13,200-13,700 range for the past 2 months, a very long time in the market, ample time to add frustration to indecision to fear, ample time to get short huge, by way of index put options, inverse ETFs, VIX calls, and other fancy new shorting vehicles that hedge funds can't get enough of. The combined amount of short positions in the market as of this morning had reached all-time records. And when 13,700 was decisively broken out of, and even though the market was already up more than 100 points, a decent up day morphed into a panic buying day that propelled the Dow up almost 300 points.
This kind of market action used to happen on the downside when key supports were broken. The fact is that up and down action are becoming more and more indistinguishable because of all the new inverse products. It used to be that stocks went down much faster than they went up. A day like today forces us to revise that piece of outdated market wisdom.
No comments:
Post a Comment