Interesting Spot For Shorts

1.) BULL – Despite Friday’s really awful price action, we’re still in a bull market, and Friday was just a bit of a reset. What makes this part of the bull market interesting is the amount of “shorts.” One of the most important things happening beneath the surface of this market has nothing to do with interest rates, tariffs, elections, or whatever headline happens to be dominating the news cycle today. The median short interest in the S&P 500 is currently the highest it’s been in more than 15 years. That doesn’t mean stocks have to go down and that the bears are right. It simply means there are more people betting against stocks than we’re used to seeing. That makes a lot of people (the shorts) very vulnerable. Short sellers eventually become buyers. That’s the deal they make when they enter the trade. The higher the level of short interest, the larger the potential pool of future buyers, which is why this matters at this stage.

2.) WEI – This is "The Weekly Economic Index," which aggregates 10 high-frequency daily and weekly data series to track real-time US economic activity. It rose to 3.2% for the week of May 29, its highest reading since August 2022. This suggests that real GDP is growing around 3% year over year (YoY). What the market will look for is if that growth rate is accelerating against its base effect or the previous quarter and year numbers. So far, so good.

3.) VIX – Friday is what we’d call episodic and non-trending. VIX spikes happen “out of the blue” from time to time. Those spikes are always followed up with lots of narratives…this time it was the jobs report. So a good jobs report should be viewed as bad now, hey? Ok. Of course, VIX spiking +39% in a day rattles people. But under the surface of how VIX trades, at this point, there doesn’t appear to be anything to get too worried about. I’ve commented recently that a spike wouldn’t be too surprising. VIX hit the bottom of the trend on Friday and is now down -13% to 18.71. Moreover, Implied Volatility Premiums in the S&P 500 continue to suggest that VIX drifts lower. On top of all that, the MOVE Index (bond volatility) barely moved Friday and is still in a bearish (downward bias) trend. Friday was also a record day for SPY (S&P 500 proxy) put buying with 64% of it being ODTE – Zero Day To Expiration. Those puts expiring and others getting unwound should help markets today.