At the beginning of the month, I showed that the NYSE short interest has risen to the highest level since July 2008, I said that this indicator either means that the market is poised for a crash as it did last time, or - would likely - result in the biggest short squeeze in history.
I said that "either a central bank intervenes, or a massive forced buy-in event occurs, and unleashes the mother of all short squeezes, sending the S&P500 to new all time highs."
Since then two things have happened: one after another central banks did intervene, leading to the biggest VIX monthly drop in history...
... and yes, as Bank of America said, "It's Not A Risk-On Rally, This Is The Biggest Short Squeeze In Years."
So, where does that leave us?
While we still haven't taken out the all time highs - there are about 30 points to go there; the following chart below shows, with just two trading days left, October is on pace forthe biggest monthly point jump in S&P 500 history.
... which courtesy of the earnings recession in the past two quarters, has pushed the market right beyond the point where back in May Janet Yellen said "valuations are quite high."
The only "net buyers" of equities this year have been "individuals," while"professional" firms have been "net sellers." This is the epitome of the classic"smart money/dumb money" analysis where individuals are used by institutions to offload positions that are no longer optimal. The question is with corporate profits and earnings declining, weak economic data, and the threat of tighter monetary policy - will individuals once again be left "holding the bag" while institutions derisk portfolios in advance of the next decline?
If the professionals are looking at "risk" and planning on how to protect their capital from losses when things go wrong - then why aren't you?
Exactly how many warnings do you need?