As the mother of all “short compression” helped attract shares to historical income on Wednesday

The massive number of short hedge -fund sellers rushed to close their positions during a sudden splash on Wednesday, turning a stunning action into one for history textbooks.

Traders – rates for a decrease in stock – scored a record number of short rates Against US shares on Wednesday as president Donald Trump Initially, more steep tariffs were rolled out.

In order to sell short, hedge -fods borrow the safety they are betting from the bank and sell it. Then, when safety decreases from where they sold it, they buy it cheaper and return it to the bank, making a profit from the difference.

But sometimes it can knock down.

As the stocks flew in the news of the tariff pause, the hedge fond was forced to quickly redeem borrowed stocks to limit their losses, the phenomenon on Wall -Street, known as a short compression. With this artificial power force that pushing it above, the S&P 500 ended with its third largest profit after World War II.

According to the Bank of America, the short positioning was almost twice as much as the size, which is observed in the first quarter of 2020 against the background of the pandemic. According to Goldman Sachs, when the funds covered, the basket from the shortest stock increased by 12.5% S&P 500‘S profit by 9.5%.

And a tremendous 30 billion shares traded at the US exchanges during the session, noting the most difficult volume day, according to NASDAQ and FACSET, which returns for 18 years.

“You can’t catch the step. If you see someone a short cover, the weekend do the door become so small with these crowded deals,” said Jeff Kilburg, CEO KKM and CIO. “We live in a world where the market is more and more thicker, there are more and more paranoia.”

Of course, there were real buyers. According to the Bank of America, only long funds bought a record amount of technology stocks, especially the last three hours.

But traders credit shorts that work at the magnitude.

“The pain on the short side is sensitive; we witnessed the last few weeks is extremely,” – said Opepenheimer. “What we saw in technology in this rise clearly covered, but more real buyers add to the semi -finals of higher quality.”

Thin liquidity also played a role in monsters on Wednesday. Size Futures of Shares (CME E-Mini S&P 500 Futures) According to Goldman Sachs, you can trade with a mouse, which has dropped to a minimum of $ 2 million. Cutting thin markets strive for negative prices fluctuations.

The markets were distracted on Thursday, when investors realized that the economy was still in danger of super-high tariffs for China and uncertainty, which will bring daily negotiations with other countries over the next three months.

There are big short positions on the market, traders said.

This can again nourish things when the market starts rallying again.

“The view on the table is that the short cover is far from over,” the Bank of America’s trading table said in the note. “Our reflection is that the market cannot risk a short less than 3 hours, which provided 20%+ SPX index and the main decrease in pure exposure over 7 seven weeks.”

“No shot was cleared in less than 3 hours,” said Bank of America.

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