Goldman Sachs: U.S. Stocks May See a "Short Squeeze" Driven New Rally

According to Odaily, since late April, bearish bets in the U.S. and Canadian stock markets have expanded rapidly. Data from S3 Partners LLC shows that total short positions have increased by nearly $100 billion, reaching $21.3 trillion, the highest level since the firm began tracking in 2010. Meanwhile, data from Goldman Sachs' prime brokerage business indicates that the median net short interest in S&P 500 components as a percentage of market capitalization has risen to 3%, the highest level since the end of 2011.

Goldman Sachs' trading desk views this positioning structure as a key signal of change, suggesting that the next phase of market upward momentum could come from a "short squeeze" driven by short covering, rather than continuing to rely on the rally expansion led by large-cap tech stocks over the past two months.

A team consisting of Gail Hafif, Brian Garrett, and Lee Coppersmith pointed out: “We do see potential for the market to move higher from current levels, but the next leg of the rally is more likely to be fueled by short covering in unloved sectors of the market and risk aversion toward momentum mania.”