Short Squeeze? Long Squeeze?

So on Friday we had the Asian markets inexplicably firm, right from the start, despite soggy US overnights. Then that night, really really sh1tty job loss data and company announcements in the US (and multi Euro-rate-cuts, which left Europe unexcited,) was greeted with joy and a size rally (characteristically obnoxious Wall Street behaviour.)

Monday we went charging up in the morning in Asia on long onlies shoving cash at us, not on the weekend's Obama New New Deal infrastructure and jobs proposals, as it was largely ignored at the time, but on the start of China's 3 day We'll-Do-Whatever-It-Takes-Because-We've-Already-Seen-The-Export-Data Conference (the "central economic work conference")... and then we got a turbo boost from not-new-news that Chinese domestic investors will one day, some day, be able to invest in Hong Kong. And then there was the olf chestnut: "It Was Bargain Hunting" (ie "wedonno.") No real evidence of size short covering actually seen by brokers, but many reports (much later in the day) that it must all have been from short covering.

Only after the US powered ahead on Monday that evening, did those shrewd commentators decide that Asia's upswing had all actually been for the Obama New New Deal...

Then a couple more days of bad bad corporate news and slashed guidance in Asia and the US, horrible macro data from China and elsewhere... and continuing strength in the markets, including negative 3 month Treasury yields (briefly)... and here we are, with Long Onlies continuing to drive the bus, and much talk of sector (though not country, yet) rotation.

Meanwhile, all the short covering that was supposed to have been driving the markets (the rise in which was, by snide implication, of low quality), but had really been holding off, seems to be creeping its way back in, alongside some long side activity from the HFs...

• From a hot NY sales-trader last night: "75% of demand coming from HF's - 1/2 of which covering 1/2 adding to position in energy, financials - Seeing dedicated $ being put to work in tech, mats, energy"
  
• From a not-so-hot (looking) salesman in Taipei on Monday: "In terms of exposures, across all long/short funds, the net bias fell from 70 long at the start of the year to 17 end-November... Cash on the sidelines has grown. Light excess cash (5~10% excess cash) fell from 42% end-07 to 34% end-Nov; medium excess cash (10~20%) from 11% to 9% and heavy excess cash (over 20%) ROSE from 47% to 56%."
• From a Korea sales-trader this morning: " THIS IS A LONG SQUEEZE NOT A SHORT SQUEEZE - Foreigners have Net Bought $373mn in Dec MTD... YET Foreign % ownership of KOSPI current 29.12% still lower than Oct 30% lvl as buying cannot keep up with mkt cap rise."

All this alongside waning skepticism about a year end rally. ("But... but... this rally would just set the bar higher for next year... so, why, er, huh? And look how much they're UP from the October lows... it's crazy! I'm not playing - books are closed, bud! But... well, I give it one more day... one more day... Oh crap crap crap - I better cover this and buy some of that...")

I actually do give it another day (then I add to my shorts to trim back my net long position.)

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