Short interest has surged in Germany and the UK, while the US remains unchanged, and France sees a decline. European markets are rising in local terms, with Germany leading. A shift from reversal to momentum strategies is evident as investors short on the way down. Volatility is up, but implied levels suggest a short-lived spike.
Recently, short interest has spiked for Germany and the UK, while the US remains flat, and France shows a decline. The Eurostoxx is rising gradually.
Europe is up in local terms, more so when adjusted for currency, while the US is down, with a greater decline when adjusted for currency. Germany leads in Europe, and the UK trails behind.
The growth in Germany and the UK positions aligns with those markets outperforming, as investors follow a reversal strategy, shorting on the way up.
The sharp increase in short positions in Germany and the UK corresponds with the market sell-off, with Germany experiencing the steepest decline. This marks a shift toward a momentum strategy, with investors shorting on the way down.
Volatility has increased this month, but Germany continues to lead in volatility, returns, and shorting.
Going forward, both the S&P and DAX have a 3-month implied volatility of 20, suggesting that the DAX spike is temporary.
The Eurostoxx and CAC are at 18, indicating a decline in Eurostoxx volatility.
The FTSE remains at a volatility of 12.
The volatility market is saying this is short lived.
Recent market activity highlights shifting strategies, with Germany and the UK experiencing increased shorting amid volatility. The data suggests that while uncertainty persists, implied volatility forecasts a temporary disruption. Investors should monitor positioning trends closely, as the shift from reversal to momentum could influence broader market movements in the weeks ahead.
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