IWM Finally Gives signal As Short Squeeze Sees Trouble

This is what was missing in the IWM and probably all Russell averages, but as the TICK data showed the short squeeze there was faltering, look what happened...

This is why patience is important and confirmation among strong, objective data is absolutely necessary. My guess is there will be tons of limit orders to buy the IWM pre-market or in AH, but I suspect it's going to look like a very nice short before 2 pm tomorrow, the 3C intraday chart finally faltered as the TICK data and most shorted index started to as well.

Note the little jiggle in yellow at the close in the otherwise picture perfect short squeeze.

What easier way to short in size in to great prices than the set up we have in front of us. I'm not saying I would here, this is the first step of confirmation, but it's interesting the market needed the SPY Arbitrage to kick start a short squeeze, we saw the same a few days ago. How do we know this? Simple...

 The SPY Arbitrage that we saw being put together late yesterday worked the market in the morning and early afternoon, once it can get the market to an area where retail will buy, it has done it's job and can back off, note around 12 p.m. or so it starts backing off.


 Around the same time, the Russell 3000 Most Shorted Index (red) takes off in a squeeze.

This allows the HYG longs to get out as no one wants to be caught long a risk asset without a seat when the music stops playing...

The 15 min VXX chart intraday shows the bid for protection in a strong way, risk assets abandoned as soon as the squeeze begins and protection bought.

What was the actual catalyst to get the squeeze moving?, I'd have to look around quite a bit, but it could be as simple as this...

Resistance being breached in the IWM and probably the R3K or component shorts would be a catalyst, the 50-bar also, but it looks more like resistance.

Short Squeeze Concepts: Short squeezes look like a straight line, there's no significant corrections during them as you see after 12 p.m., a near straight trendline in the IWM with no corrections. Short squeezes are also notorious for being on low volume, today fits the bill perfectly there. The thing is, when an index is propelled solely by a short squeeze, which this one was because it couldn't do anything without a sponsor to get it above resistance which was the SPY Arbitrage as suspected yesterday being the carry crosses weren't up to the job, when there's no more shorts to cover and the TICK data looked like the shorts were running dry, then there's no more demand as covering a short is buying and that's demand.