How did the mother of all “short pressure” help the shares to historical gains on Wednesday

A huge number of sellers who exposed the hedge boxes rushed to close their sites during the sudden increase on Wednesday afternoon in the stocks, and they turned an amazing gathering into one in history books.

Traders – betting on the decrease in stock prices – It accumulated on a record number of short bets Against American stocks before Wednesday as president Donald Trump Initially, the customs tariff was launched more severe than expected.

For a short sale, the hedge funds borrowed the security boxes they are betting on from a bank and selling it. Then with the decrease in prices in the prices where they sold it, they buy it cheaply and return to the bank, and benefit from the difference.

But sometimes it can be counterproductive.

As the shares rise on the news of the customs tariff, the hedge funds were forced to re -purchase their borrowed shares quickly in order to reduce their losses, a Wall Street phenomenon known as short pressure. With this artificial purchasing power that pushed it up, the S&P 500 ended with its third largest gain since World War II.

Upon his arrival on Wednesday, short positioning was twice the size of the size seen in the first quarter of 2020 in the beginning of the Covid’s pandemic, according to Bank of America. With the money operation to cover, a basket of 12.5 % most negligent shares increased on Wednesday, according to Goldman Sachs, and it pulls a leap larger than S & P 500Even 9.5 %.

And 30 billion shares traded on American stock exchanges during the session, which represents the heavier day in size, according to NASDAQ and FactSet data, which dates back to 18 years.

“You can’t stop a step,” said Jeff Kilberg, CEO of KKM Financial Company and executive director. “We live in a world where there is more and more soft to the market, and there is more and more crazy.”

Of course, there were real buyers as well. The money has only bought a record amount of technology shares during the session, especially the last three hours of the day, according to Bank of America data.

But merchants are due to the fact that the short pants that work to cover the size of this step.

“The pain on the short side is clear,” said the trading office in Obenheimer. “What we saw in technology at this height was clearly covering it, but more than the real buyers add to half a high quality.”

Thin liquidity also played a role in the monster movements on Wednesday. The volume of futures for stocks (CME E-MINI S & P 500 Futures) One can trade with a mosic click, which fell to the lowest level ever of two million dollars on Monday, according to Goldman Sachs data. The high markets are greatly tended to distribute huge price fluctuations.

The markets were declining on Thursday, when investors realized that the economy was still at the risk of Chinese definitions and the uncertainty that daily negotiations with other countries would bring the next three months.

Merchants said that there are still great short positions on the market.

It may nourish things again, if the market starts to gather again.

“The office view is that the short coverage has not ended,” the Bank of America trading office said in a memo. “Our thinking is that the market cannot boost risk in less than 3 hours, which provides 20 % of the SPX index on the downside and a significant reduction in leverage over 7 weeks.”

“It has not been paid in less than 3 hours,” said Bank of America.

Get your ticket to Pro Live

Join us on the New York Stock Exchange!
Unconfirmed markets? Gain edge with CNBC Pro LiveAn exclusive event, the opening on the historic New York Stock Exchange.

In the dynamic financial scene today, access to expert visions is very important. As a subscriber in CNBC Pro, We invite you To join us for The first exclusive event, CNBC Pro Live at The Iconic Nyse on Thursday, June 12.

Join Proactive clinics led by our positives Carter Worth and Niles and Dan Eve, With a special version of Pro conversations with Tom Lee. You will also get an opportunity to communicate with CNBC experts, talents and other subscribers within an exciting cocktail watch on the legendary trading floor. Tickets are limited!