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Massive Short-Squeeze Sends Small Caps Soaring; Gold Up, USD Dn Ahead Of CPI

massive-short-squeeze-sends-small-caps-soaring;-gold-up,-usd-dn-ahead-of-cpi

Massive Short-Squeeze Sends Small Caps Soaring; Gold Up, USD Dn Ahead Of CPI

With all eyes on tomorrow’s CPI print (and Friday’s Nasdaq rebalance), what was left for traders but to bugger about in Small Caps, squeezing shorts, and playing gamma-grab-ass.

‘Most Shorted’ stocks have exploded 11.5% higher from Thursday’s lows – far outpacing the 10%-in-5-days into June’s month-end…

Source: Bloomberg

Small Caps benefited most from this squeeze-gasm, but all the majors ended green as FOMO struck in the last few minutes…

Small Caps underperformed Nasdaq once again as the ratio breaks interim support…

Under the hood, 0-DTE traders pushed aggressively against the uptrend in Small Caps early on… but that failed and they were forced to cover – juicing Russell 2000 in the afternoon…

Source: SpotGamma

Treasuries were mixed (and quiet) today with the short-end underperforming (2Y +3bps, 30Y -1bps), but the whole curve remains lower on the week…

Source: Bloomberg

The dollar pushed back to its mid-June lows (this was the lowest Dollar Index close since 5/10/23)…

Source: Bloomberg

Bitcoin spiked up to $31,000 last night and then puked back but has been slowly bid all day, never breaking down to $30,000…

Source: Bloomberg

Gold managed to hold on to gains today – but do you notice pattern…

Oil surged to the upper-end of its recent trading range with WTI testing $75…

Finally, Bloomberg notes that 3-mo bill yields are back at the highs of late May in anticipation of another Federal Reserve rate hike. You can lend to the US government for three months at 5.44%, which is exactly what you’d get from lending to single A rated corporates for more than 10 years (the average maturity of the Bloomberg US Agg A index).

Additionally, the spread between the earnings yield on the S&P 500 and three-month bills, already the worst since the dot-com bust, has fallen to a fresh low

Source: Bloomberg

On that basis, the most expensive sectors are info tech and consumer discretionary, which have earnings yields more than 200 bps lower than the yield on bills. For info tech, that’s comparable to the end of 2000.

Tyler Durden
Tue, 07/11/2023 – 16:00

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