Is This Why Nasdaq Is Leading The Plunge?

Is This Why Nasdaq Is Leading The Plunge?

‘Stonks’ are puking this morning (led by Nasdaq) since the cash markets opened.

And while most of the attention for the plunge has been focused on rate-velocity anxiety, we suspect there is another, even more powerful reason.

Starting at around 1500ET yesterday, the ‘old’ WallStreetBets ‘Short-Squeeze’ stocks exploded higher once again amid a major gamma squeeze in GME

And this is happening just as hedge funds piled back into shorts.

As JPMorgan wrote on Tuesday, while hedge funds were quite positive on markets especially in the US, over the past 6+ months (JPM had seen net buying most days since late July 2020), “following the recent weakness and rotation, we’ve seen HFs react by adding more shorts, which are picking up after the large covering in late Jan”, and remarkably Monday was the largest day of short additions in North America since late June 2020!

And judging by the big dump in Hedge Fund ‘Very Important Positions’ today…

Which are dominated by the big-tech stocks that constitute so much of the Nasdaq…

It should be no surprise that the teach-heavy index is tumbling as hedgies are forced to sell their most liquid and largest holdings to meet risk/margin needs on the other side of the ledger.

Who could have seen this coming?

The answer appears to be “yes“!

Tyler Durden
Thu, 02/25/2021 – 12:23

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Author: Tyler Durden