Market volatility fueled by US President Trump's ever-changing tariff policies has seemingly made for an opportune time for short sellers. S3 Partners head of predictive analytics Ihor Dusaniwsky tells Julie Hyman and Josh Lipton on Market Domination Overtime that short sellers are "reaching into a little dusty pocket now with nothing in it" after the stock market rally.
To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here.
Shorting into this volatile market has been a profitable trade for short sellers. However, as markets rocket higher following President Trump's tariff pause, we're diving into what this means for short trades. Igor Dusaniwsky is with us. S3 partners, head of predictive analytics. It is great to see you, especially on a day like this. Igor, you tell me. This feels to me, today's trade felt to me like there was definitely some squeeziness happening. Short squeeze is happening today. But I'm curious what your data is telling you.
You know, easy come, easy go. We were, you know, shorts were up 159 billion dollars in, in P&L, in market-to-market P&L, in uh, in April. Um, looked like there was going to be a little bit of uh, covering, you know, and people looking realize some of the profits. Today's trading is uh, just crazy and I'm not sure how many people were able to cover their, their trades and and save some of their uh, some of their profits. But there definitely was some short covering in uh, in the momentum guys and the guys that were getting into uh, uh, hedges.
Igor, you're a long time student of the markets. I'm just curious to get more of your, your broad take on what we saw today. I mean, as someone who's studied the market a long time, the headlines, the response, the reaction. What, what did you make of it, Igor?
Um, keep your head down and uh, I mean, I just don't see what, what uh, what the smart bet is right now. Uh, what we're seeing is a little bit of deleveraging from uh, some of the hedge funds because uh, there are margin calls when the markets uh, more it takes a downturn. Um, but there's also in short somebody because they're looking to play the other side of the market. So we're seeing activity on both ends. We're going to see a lot of uh, by the covers in a lot of names that were uh, moved up high uh, really quick because uh, these were short-term bets.
Where have you been seeing this month so far? Where have you been seeing um, the biggest increases in short interest in terms of sectors?
Well, first of all, you got ETFs. Guys are using ETFs as hedging strategies. So you've got the SPY, the QQQ, the IWM, and then fixed income ones like the TLT, HYG, where instead of going in and and having to short a whole basket of names, they're just shorting a uh, a large cap ETF. So we're seeing a lot of short selling in financial services, capital goods, software and services. You know, stocks like uh, you know, Caterpillar, Boeing, Eaton, Vans, Furtive on the capital goods side. And financials, you're seeing Apollo, you know, Coinbase, PayPal, JPM. Um,
I mean, did all this stuff just get blown out today? I mean, everything you just I mean, everything went up today. But everything you're describing is stuff that definitely went up today.
Oh yeah. Oh yeah. I mean, everyone who had a pocket full of money is uh, is now reaching into a little dusty uh, pocket now with nothing in it. Uh, we've got, I mean this happens. I mean, the market is so volatile with Trump, President Trump in the White House. We're seeing these moves up and down on a daily basis. If you're a momentum trader, I mean, you might have a great day, you might have a crappy day. It all depends on uh, on what happens with the tariffs and what happens with uh, with bonds.
When you said Igor, I think you said shorts were 159 billion in April, can you break that down for us a little bit? Like what were the most profitable industry groups, sectors to short? What were the least?
Uh, energy was, was a, was a really profitable short. Semis was a great short. Um, what else was there? Pharma biotech was an excellent short. There really were no bad shorts. What happened? Well, I mean, we did analysis of the market and we found that 81% of all stocks that were shorted were profitable. 97% of every dollar shorted was profitable. So I really don't see names on, on the back end that were in red numbers uh, you know, in size. This was basically, you know, shooting fish in a barrel.
I know you were looking at the fixed income um, ETF side of things as well because the, the action there was intriguing, puzzling to some. What were you seeing from your end?
Yeah, we saw a large increase in ETF short selling. And I think this is more hedging than anything else. Uh, there's a lot of people that want to trade ETFs as a hedge to their portfolio, hedge, hedge to uh, you know, fed moves. Uh, but don't have the wherewithal or, or uh, the uh, the expertise to trade uh, specific bonds. So what they'll do is they'll trade the TLT to get some treasury exposure. On the corporate side, they'll do HYG and LQD, which are the high yield and uh, and uh, uh corporate bonds. Uh, and we've seen just 8 billion dollars worth of short selling uh, so far this year, uh, 2.6 billion worth of short selling just in the last 30 days. So there, there has been a lot of moves. I mean shorts were down over 800 million, almost 800 million dollars in the first quarter of the year. They're up 1.3 billion in April. Again, today, you know, with the rates coming back up to 4.3%, we'll see what happens on the, on the P&L reports tomorrow.
We shall see. Igor, always good to see and to have you on the show. Thanks for joining us.
It was great being here. Thank you.
