To The Moon

No large hedge fund has shorted American stocks, thus driving up the stock price. However, investors' sharp reduction in holdings may have the same effect as chasing up the market. It's easy to focus on data on the biggest net-short position in S&P 500 E-mini futures in more than a decade. But as often happens in the financial sector, the truth is not always what it seems. This so-called big short is inconsistent with the positioning of NASDAQ and Dow Jones.It would be strange if speculators, that is, hedge funds, only took a short position on the S&P 500. Picture On the contrary, these data are likely to be influenced by hedge fund index arbitrage.Index arbitrage was once the exclusive domain of banks, but it was limited by Volcker rule. This was introduced in the wake of the global financial crisis, limiting banks' proprietary trading activities, especially the realization of short-term arbitrage profits. Index arbitrage involves selling index futures to customers and buying a package of stocks. As a result, hedge funds are classified as speculators in the Commodity Futures Trading Commission (CFTC) position data, rather than as the commercial sector as banks are, and they are involved in this business, which means that the data cannot be calculated simply at face value. One way to look at this is by looking at the beta coefficient of HFRX hedge fund returns and stock market returns. Overall, hedge funds-as well as macro funds, equity long-short funds and CTA-are likely to remain neutral to net long stocks rather than short ones. Picture But this does not mean that FOMO cannot push the market higher. Artificial intelligence is fueling market sentiment. We will see whether the innovation of the current big language model will be affected by the "Amara effect", that is, the short-term impact of new technologies is overestimated, but underestimated in the long run. Either way, the stock market rally has been driven by AI-related stocks, with the three best performers in the S&P index so far this year being Nvidia, Meta and Advanced Micro Devices. Picture Coupled with the reduction of a large number of investors, the survey of fund managers of Bank of America shows that the net percentage of managers who increase their holdings of American stocks is negative than that of any other major asset class, so even without the mythical "hedge fund shorting", the market still tends to continue to rise. $NQ100 Index Main Connection 2306 (NQmain) $$Dow Jones Main Link 2306 (YMmain) $$SP500 Index Main Connection 2306 (ESmain) $$Gold Main Connection 2306 (GCmain) $$WTI Crude Oil Main Link 2306 (CLmain) $