Like the mother of all “short cuff”

The huge number of short sellers of hedging funds rushed to close their positions during reserve headlines on Wednesday afternoon, transforming the staggering so into one for historical books.

Traders – betting on share prices – has laid a record number of short factories Against US actions before Wednesday as a president Donald Trump Initially implemented more steep than expected tariffs.

To sell short, hedging funds borrow security that they bet from the bank and sell them. Then, when the security reduces the price from the place where they sold it, they reject it cheaply and return the bank, drawing from the difference.

But sometimes it can turn around.

When the actions increased to the news of the break of the tariff, hedging funds were forced to quickly redeem borrowed stocks to limit their losses, the phenomenon on Wall Street known as a short squeeze. Because this artificial shopping force pushed her higher, the S&P 500 ended with the third greatest profit since World War II.

On Wednesday, short positioning was almost twice as much as the size observed in the first quarter of 2020 in connection with the arrival of Covid pandemic, according to Bank of America. According to Goldman Sachs, when the funds were running, the basket with the most compact actions increased by 12.5% S&P 500Profit 9.5%.

According to Nasdaq and Factet Data AGHER FACTSET ACCESS HANDLED on the US stock exchanges during a session, meaning the hardest day on a record day.

“You can’t catch the move. When you see someone short, the exit door becomes so small because of these crowded transactions,” said Jeff Kilburg, general director of KKM Financial and CIO. “We live in a world where there are more and more vibrations on the market, there is more and more paranoia.”

Of course, there were also real buyers. According to data from Bank of America, long -term funds have bought a record number of technological actions, especially in the last three hours of the day.

But traders attribute shorts to protect for the size of the movement.

“The pain on the short side is tangible; Whippsawa, which we have testified over the past few weeks, is extreme,” said Oppenheimer’s desk in the note. “What we saw in technology was obviously covering, but more real buyers adding higher quality to the semi -finals.”

Thin fluidity also played a role in the Wednesday movements of Monster. The size of spare time -term contracts (CME E-mini S&P 500 Futures) According to Goldman Sachs data, you can trade with mice clicking to the lowest level of $ 2 million. Drastic thin markets tend to fuel price fluctuations.

Markets withdrew on Thursday, when investors realized that the economy was still threatened with super-wysoki tariffs of China and the uncertainty that daily negotiations with other countries will bring in the next three months.

Traders said that large short positions remained on the market.

This may drive again if the market begins to gather again.

“The view of the desk is that the short cover is far from the end,” Bank of America said in the note. “We understand that the market cannot risk a short one in less than 3 hours, which was provided by 20%+ SPX indicator and a significant reduction in the net lever within 7 seven weeks.”

“No shots settled in less than 3 hours,” said Bank of America.

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