Yesterday, when summarizing the latest torrid move in stocks higher, we said that stocks surged 'on the biggest short-squeeze in 4 months."
Today, Credit Suisse picks up on this theme and asks "how much of this rally is short covering?" The bank's answer: "Looks like a lot based on this prime services data."
CS adds that: "today, several short baskets outperforming; Materials by 120 bps, energy by 80 bps, consumer discretionary by 50 bps, telcos by 37 bps, healthcare by 25 bps, info tech by 20 bps. Goldman most short rolling basket up 4%. Lot of the lower quality high levered names outperforming at the expense of the higher quality more widely owned names."
How much of this squeeze is spilling over into the market neutral quant fund world, and leading to one of the biggest dislocations and deleveragings observed since August 2007 as noted earlier?
It is unclear as of this moment, however once the dust settles we expect to see some rather prominent names getting badly hit on the last three days' move.