Short Sellers Give Up? | The Case for Interest Rates to Stay High for Longer

Derek Moore points out that no, the Fed doesn’t need to lower rates without some problem or a recession. Looking at the nineties when markets went up despite Fed Funds rate above 5%. Then looking at the net short positions of traders via the commitment of traders report. It shows recently at markets moved higher, short sellers covered causing a short squeeze? Finally, before a recommendation, some talk about the upcoming earnings season and a reminder in 2022 earnings did not go below those of 2021 and the market still sold off due to multiple contraction.

What is a short squeeze?

What is the commitment of traders report?

Bloomberg article pointing to bears (short positions) being closed the most since 2020.

How short sellers closing positions add fuel to market rallies.

Are large net short positions in the S&P 500 futures a good contrarian bullish signal?

How earnings still grew in 2022 a little bit but markets still sold off due to multiple contraction.

What is multiple contraction?

Earnings season is coming up and expectations are for a down quarter.

Comparing the Fed Funds rate in the nineties to today

How markets went up even with rates above 5% in the 1995 to 2000 bull run

What would make the Fed lower rates?

Bloomberg article hints that with less short positions outstanding the short squeeze effect drops?

Mentioned in this Episode:

Bloomberg article on bears covering their short positions https://www.bloomberg.com/news/articles/2023-07-07/force-firing-up-the-stock-market-cools-off-with-shorts-conceding#xj4y7vzkg

Nasdaq 100 Index Strong First Half Equals Strong Second Half? | Overbought or not? | Trying to Guess the Forward PE Multiple Is Hard!https://podcasts.apple.com/us/podcast/nasdaq-100-index-strong-first-half-equals-strong-second/id1432836154?i=1000619186796

Fear and Greed Index | Volatility Surface | Put Call Ratio | Wall Street Gets Bullish | Homebuilders Surprise

https://podcasts.apple.com/us/podcast/fear-and-greed-index-volatility-surface-put-call/id1432836154?i=1000618362312

Jay Pestrichelli’s book Buy and Hedge https://amzn.to/3jQYgMt

Derek’s new book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr

Contact Derek derek.moore@zegafinancial.com