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Year-end Rally - Arrived Early

After three months of negative global markets along with the negative sentiment. This month's reversal has been a surprise for many. Especially with the global equity markets rising by 8.5% till month. Within this, the US equity markets have been the biggest surprise along with the 10-year bond yield falling by 11% till month.


This kind of move is generally seen during December month as the quarter, year and month-end rebalancing of pension and other funds take place. However, given the negative sentiment during the September quarter, large short positions created by Hedge Funds and even CTA( Algorithm) funds were maximum short.


The relief from inflation releases and some positive moves from China relating to easing financial conditions have brought in the tally ahead of time. Within the last week, CTA funds bought almost $70 Bn, the biggest buying in the last 10 years.


Whether these moves are just a short squeeze with sentiment reversal, is important to know as it will be crucial for the next two-month direction. If it is a temporary move then any slight negative news would start the reversal and as CTA funds are almost fully long their reversal might be volatile.

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