Stock markets happened sometimes on Monday: US indices added more than 1%, while Asian markets also reiterated US momentum on positive signals of international trade. Reports on Phase 1 commitments and further negotiations, as well as a declaration on a reduction in the EU-US tariff, helped markets reach new levels.
It is also worth noting the general change in market sentiment. Earlier this month, the S&P 500 tried for a long time to reach historic highs. The Dow Jones index showed a moderate but steady decline from August 11 to 20, which also encouraged caution.
But at the end of this week, buyers returned to the market and broke the correction mood. It seems that the idea of growing markets with an economy that has not fully recovered is becoming more and more mainstream.
A huge layer with short positions on the most popular stocks and indices was wiped out under pressure of stimulus and improvement of economic indicators.
As a result, last week there was a record low number of open short positions on the S & P500, since at least 2004. This week’s rise in the index is likely to wipe out even more.
Tesla, the bear’s favorite population, has the lowest open sell interest in nine years.
This summer’s market rally has hit traders with a different perception than usual and formed an agreement on the growth of the stock market. Influential Jim O’Neill calls August a month to follow closely, as trends in August set the tone for the rest of the year. And so far we have witnessed almighty optimism.
There is also a disadvantage to opening short positions. Without the shorts being forced to close, there will be no sharp bursts in stocks and indices. The market can now be controlled by profit-taking after previously capturing growth.
Aside from closing short positions, it is also worth noting that trading volume in August is lower than normal. Investors often return to the markets after a sluggish June and July, but now there is a smooth decline in contrast to index growth.
The question of what can happen next can be answered by returning to the foreign exchange market. The growth of the dollar from current levels reveals the markets’ cautious mood over the prospect of a risk value. Renewed pressure on the USD and an upward turn on the EURUSD promise to strike against the bears again.