Latest Doug Noland article talks of short squeeze and other interesting stuff:
August 21 - Wall Street Journal (Juliet Chung and Rob Barry): "Short sellers are facing their worst losses in at least a decade, a Wall Street Journal analysis has found, as many of the rising stocks they bet against have only continued to soar. That has stung several high-profile hedge-fund managers, including William Ackman and David Einhorn, who have placed prominent short bets. In the Russell 3000 index, the 100 most heavily shorted stocks are sharply outperforming the average returns of stocks in the index, according to a Journal analysis of data provided by S&P Capital IQ. The shorted stocks are up by an average of 33.8% through Aug. 16, versus 18.3% for all stocks in the index. The gap between the performance of the most-shorted shares... and the market as a whole is wider than it has been in at least a decade... 'It's actually more painful now than it was in '99,' said veteran short seller Andrew Left of... Citron Research."
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And while it is easy for most to dismiss (or, better yet, relish) the pain being inflicted upon short sellers, the bludgeoning of the bears is indicative of a highly speculative marketplace that has become disconnected from underlying fundamentals.
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The upshot has been a late-cycle speculative melt-up in U.S. stocks, in particular. Popularly shorted stocks have been targeted for "squeezes" the most aggressively since 1999. So-called "high beta" stocks have become market darlings like it's 1999. Stocks with minimal earnings (hence, little risk of earnings disappointments) have become the target of market game-playing and shenanigans to an extent not experienced since 1999.
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The excesses from 1999 set the backdrop for a major market Bubble top in early-2000. Yet the late-nineties Bubble was relatively contained, chiefly impacting a narrow group of stocks, the technology sector and only a segment of the U.S. and global economy. The now well-entrenched "global government finance Bubble" has become deeply systemic in the U.S. and abroad. The Bubble essentially enveloped all risk market and myriad strategies. It has fueled conspicuous speculative excess in risky strategies. It has, as well, fueled unappreciated excesses throughout perceived low-risk strategies.
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As an analyst of Bubbles, I readily admit it is impossible to accurately predict the timing of their demise. Even in hindsight, I have no idea why technology stocks put in Bubble highs in March of 2000. It's not clear why stocks peaked again when they did in 2007. It's never been clear to me why the U.S. equities Bubble cracked when it did in late-1929. But all those major market tops were put in after speculative market melt-ups pushed the divergence between inflated securities price Bubbles and deteriorating fundamentals to precarious extremes. And all three speculative melt-ups were fueled in part by powerful short squeezes, squeezes made possible by traders shorting securities in response to deteriorating fundamental backdrops. A similar environment exists for a major top in 2013.
All the Makings for a Major Top
http://www.safehaven.com/article/30882/ ... -major-top