Momentum Monday – The Short Squeeze That Broke The Market

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The past few weeks have been one giant short squeeze and everything accelerated last week. The size of the squeezes has been unprecedented and they have led to liquidations in other areas of the market. All major market indexes closed the month below their 20-day moving averages for the first time since October of last year and are currently in a pullback mode. 

What is currently quite fascinating is that we are in the midst of a new earnings season and no one is paying attention to earnings reports. All the attention is focused on stocks like GME, AMC, BB, NOK, and other highly shorted assets which are now negatively correlated to the major market indexes. The short squeeze bets have been so one-sided that they have led to liquidity crunch in some brokers. 

There’s another concern on the market’s mind right now. All those new Covid mutations and new restrictions around Europe have inspired a new life in Covid-related stocks. Most vaccine stocks were on fire last week – NVAX, MRNA, BNTX, VXRT. Covid testing stocks also showed notable relative strength after HOLX and ABT crushed market estimates.

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Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice.