Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Short Sellers May Return To Stock Markets

By Fullerton MarketsMarket OverviewApr 20, 2020 04:51AM ET
www.investing.com/analysis/short-sellers-in-the-stock-markets-may-return-200522081
Short Sellers May Return To Stock Markets
By Fullerton Markets   |  Apr 20, 2020 04:51AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Given increasing doubts on the recent stocks rally, selling USD/JPY at its peak might be appropriate. 

Short sellers have revived their wagers against the stock markets in recent weeks, taking their most aggressive positions in years.

Bets against the SPDR S&P 500 (NYSE:SPY), the biggest exchange-traded fund tracking the broad index, rose to USD68.1 billion last week, the highest level in data going back to January 2016, according to financial analytics company S3 Partners. That was up from USD41.7 billion at the beginning of 2020 and USD41.2 billion a year ago.

Those bets are a result of a wild year for investors who are struggling to reconcile the impact of the coronavirus pandemic on the population and economy. The S&P 500 suffered its fastest drop into a bear market in history — ultimately falling 34% between 19th Feb and 23rd March. Its 28% rebound since then has also been brisk, leaving some investors anxious about the strength of the rally when so much unknown remains.

Many investors agreed that the most important driver of the rebound has been the Federal Reserve’s massive stimulus plan, combined with the efforts of the US government, which sent a signal that both were willing to step in like never before to buoy the economy. US stocks bottomed March 23, after the Fed cut rates to near-zero. They took away the depression, and that scenario is out of the picture now. The Fed is the fundamental reason for the rebound. The central bank also unleashed a massive program to buy Treasurys and mortgage-backed securities, while President Trump signed a roughly USD2 trillion stimulus package, the biggest relief package in US history.

For some investors, it doesn’t pay to bet against stocks after the Fed stepped in. The stimulus spurred fear of missing out among investors and gave many the confidence to resurrect some of the most popular tactics of recent years — buying dips in the stock market and piling into shares of big technology companies.

Be more cautious about the market

Retail sales, a measure of purchases at stores, gasoline stations, restaurants, bars and online, fell by a seasonally adjusted 8.7% in March from a month earlier, the most severe decline since record-keeping began in 1992. Earnings for the first quarter among big US companies are expected to decline nearly 15% from a year earlier, which would mark the biggest decline since 2009.

Success in reversing the pandemic doesn’t automatically translate into the rapid reopening of the economy. Some states might be reluctant to reopen if there’s a risk of a resurgence in infections and deaths. The Trump administration had laid out guidelines and criteria that must be met as part of the reopening plan.

The fiscal and monetary stimulus will prevent a lot of companies from going bankrupt, but it won’t prevent sales and profits from being hammered. We expect output to be down 7% in the current quarter from a year ago, the steepest year-over-year drop in over 70 years, yet analysts expect profits to fall only 27%. That’s less than half the steepest drop experienced during the last recession, in a quarter when output fell 3%.

Our Picks

EUR/USD: Slightly Bearish

The EUR/USD pair may fall towards 1.0780 this week.

EURUSD Chart
EURUSD Chart


Hang Seng Index: Slightly Bearish

The index may drop to 23899 this week.

Hang Seng Index
Hang Seng Index

USD/JPY: Slightly Bearish

This USD/JPY pair may drop towards 106.70 this week.

USD/JPY Chart
USD/JPY Chart


XAU/USD: Slightly bullish

This {68|XAU/USD}} pair may drop towards 1684 this week.

XAU/USD Chart
XAU/USD Chart

Short Sellers May Return To Stock Markets
 

Related Articles

Short Sellers May Return To Stock Markets

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email