S&P 500 Smashes New Records As $45 Billion CTA Wave Ignites Short Squeeze

The equity rebound in Q2 has been sharp. After a 7.6% rally, the S&P 500 is at fresh all-time highs, despite a fragile Middle East ceasefire and elevated energy costs. However, the financial market plumbing might be providing a powerful tailwind. According to Neil Sethi , Managing Partner at Sethi Associates, Goldman Sachs ' data shows that commodity trading advisors, or CTAs, could buy as much as $45 billion of U.S. stocks over this week, including roughly $34 billion tied directly to the S&P 500. At the same time, hedge funds have covered bearish bets at the fastest pace since March 2020, helping fuel a squeeze higher. However, the most important question remains whether this rally has real support beneath the flows. Short covering rallies can be notoriously sharp, especially in crowded markets, yet they're not the same as conviction buying. Once the shorts get covered, the source of demand fades. Price movement doesn't necessarily tell investors much about earnings durability, economic momentum, or whether risk appetite has genuinely broadened. More Supportive Than It Appears CTA buying follows the same cautious logic. … Full story available on Benzinga.com

Source: benzinga