{"id":1292735,"date":"2023-05-22T07:10:05","date_gmt":"2023-05-22T11:10:05","guid":{"rendered":"https:\/\/bugaluu.com\/news\/price-chasing-not-short-covering-will-drive-market-higher\/1292735\/"},"modified":"2023-05-22T07:10:05","modified_gmt":"2023-05-22T11:10:05","slug":"price-chasing-not-short-covering-will-drive-market-higher","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/price-chasing-not-short-covering-will-drive-market-higher\/1292735\/","title":{"rendered":"Price Chasing, Not Short Covering, Will Drive Market Higher"},"content":{"rendered":"
\"\"<\/a><\/div>\n

Price Chasing, Not Short Covering, Will Drive Market Higher<\/span><\/p>\n

\n

Authored by Simon White, Bloomberg macro strategist,<\/em><\/p>\n

There is no big hedge fund short<\/strong> in US equities to boost equity prices. But investors\u2019 large underweight could have the same effect <\/strong>as they chase the market higher.<\/p>\n

It would be easy to fixate on data showing the largest net-short in S&P E-mini futures in over 10 years. But as is so often the case in finance, things are not always as they first seem. This supposed big short does not match positioning in the Nasdaq and the Dow Jones<\/strong>. It would be odd if speculators, i.e. hedge funds, were only short the S&P.<\/p>\n<\/p>\n

Instead, it is likely the data is being affected by the index-arbitrage behavior of hedge funds.<\/strong> Index arbitrage was once the preserve of banks, but fell victim to the Volcker Rule. This was introduced in the wake of the GFC, and limited banks\u2019 proprietary trading activities, including specifically the realization of short-term arbitrage profits. Index arbitrage involves selling index futures to clients and buying baskets of stocks against it.<\/p>\n

So hedge funds, classed as speculators in the CFTC positioning data and not commercials as banks are, moved in on this business, which means the data cannot be taken at face value. One way to see this is by looking at the beta of HFRX hedge fund returns and equity-market returns. Hedge funds in the aggregate – as well as macro funds, equity long-short and CTAs – are likely neutral to net long equities, not short.<\/p>\n

<\/a><\/p>\n

But this does not mean FOMO can\u2019t\u00a0power the market higher.<\/strong> AI is helping to fuel sentiment. We will see whether the current burst of innovation with Large Language Models suffers from the \u201cAmara effect,\u201d where the short-term impact of a new technology is overestimated, but underestimated in the longer term. Either way the equity rally is being driven by AI-related stocks, with the top three year-to-date performers in the S&P being Nvidia, Meta and Advanced Micro Devices.<\/p>\n

\"\"<\/a><\/p>\n

Throw in a large investor underweight, with BoA\u2019s Fund Manager\u2019s Survey showing the most negative net percent of managers who are overweight US equities than any other major asset class, then even without the mythical \u201chedge-fund short,\u201d markets have the propensity to keep heading higher for the time being.<\/strong><\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nMon, 05\/22\/2023 – 08:50<\/span><\/p>\n

From:Zerohedge<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Price Chasing, Not Short Covering, Will Drive Market Higher Authored by Simon White, Bloomberg macro strategist, There is no big hedge fund short in US…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[1],"tags":[],"class_list":["post-1292735","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/pbimBl-5qiz","jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1292735","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1292735"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1292735\/revisions"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1292735"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1292735"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1292735"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}