For the past few years, stocks with heavy short interest have, on average, performed better than stocks with average levels of short interest.
This year, the trend has gone into overdrive:
Heavily shorted stocks continue to outperform the market. (Source: OnondaCapital via X)
Sophisticated investors “short” stocks because they make money when the price of the stock falls. Stocks with poor fundamentals and high valuations make good “short” targets. There are a lot of those in the market right now.
The squeeze: If you’ve shorted a stock but the price rises, instead of falling, you have to buy the stock at the higher price to close the position. It’s called a “short squeeze.” Investors in a short squeeze lose money even while the stock price rises.
If the squeeze is on across the market, companies with poor fundamentals can post huge price gains, driven by short-sellers closing out their positions.
Your eyes aren’t deceiving you. Right now, the worst stocks are the ones dragging the market higher. It’s another “feature” of the terrifying bull market underway today…
~ Addison
P.S. Our latest research with Ian King regarding Dollar 2.0, will appear later today in a special edition of Grey Swan Live!
The next regulatory environment for stablecoins favors three companies. We expect they will dominate the new monetary system as Trump guides digital assets into the mainstream.
Our estimate? $20 trillion will migrate to these platforms. That’s a positive Grey Swan event, if there ever was one.
Get ready – this latest research comes out this afternoon.
This is nearly your last chance. To receive our Dollar 2.0 research, please add your info here.
If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.
