Comments
Much has been said and written last week about the social-media coordinated flash-mob attack on highly shorted stocks held by several hedge funds. One may dismiss this as retribution to those 'greedy' short sellers. As it turns out, hedge funds also hold stocks that are liquid and have significant unrealized gains. Just as most of us have in our 401(k), IRA, taxable accounts and in institutional funds.
When a hedge fund must cover a short to cut mounting losses, they raise money by selling their big gainers: stocks fall, undoubtedly hitting sell stops in portfolios, further driving prices down. We all saw our portfolios decline last week. During the GameStop (GME) market turmoil, we sold XRT (SPDR Retail) which has a holding in GME. We sold two lots of XRT near its peak, realizing a gain of 37%.
In an internal note, we felt last week was a passing storm.
Equities
US, European and Emerging Markets remain in strategic Bullish trends. Last week's selloff lowered overbought levels.