Stocks surge in massive short squeeze

Speculators are dumping their short bets in droves, says John C Burford. That spells opportunity in the charts for swing traders.

Last Monday, I covered the S&P 500 index which was in rally mode following a plunge to an extreme in bearish sentiment in January. That was when risk was definitely off and the safe havens of gold, the yen and Treasuries much favoured.

A scan of the Commitments of Traders (COT) data showed that speculators had amassed a huge plurality of short bets in stock indexes. That was one stark measure of how risk-off was definitely on.

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(Contracts of $50 x S&P 500 index)Row 0 - Cell 1 Row 0 - Cell 2 Row 0 - Cell 3 Open interest: 3,842,637
Commitments
359,215524,459418,6302,461,2712,540,1663,239,1163,483,255603,522359,382
Changes from 02/09/16 (Change in open interest: 13,285)
27,102-44,593-3,105-1,12842,75222,870-4,945-9,58418,230
Percent of open in terest for each category of traders
9.313.610.964.166.184.390.615.79.4
Number of traders in each category (Total traders: 636)
135155162247264468195Row 8 - Cell 7 Row 8 - Cell 8
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John is is a British-born lapsed PhD physicist, who previously worked for Nasa on the Mars exploration team. He is a former commodity trading advisor with the US Commodities Futures Trading Commission, and worked in a boutique futures house in California in the 1980s.

 

He was a partner in one of the first futures newsletter advisory services, based in Washington DC, specialising in pork bellies and currencies. John is primarily a chart-reading trader, having cut his trading teeth in the days before PCs.

 

As well as his work in the financial world, he has launched, run and sold several 'real' businesses producing 'real' products.