Remember the GameStop mania of 2021, fueled as it was by forcing short sellers to cover their bets? Now, another epic episode of short squeezes could be on the horizon. The number of stocks among the top 3,000 U.S. companies with 20% of their outstanding shares sold short has reached the upper end of the historical range, exceeding that seen during the meme stock craze in early 2021, according to Trivariate Research.
The short covering further fuels the stock's rally. The stock market is in the middle of a strong rally as inflation pressures ease and the Fed nears the end of its rate-hiking campaign. The Dow Jones Industrial Average is currently up for 11 straight days, its longest rally since 2017. The S & P 500 has rallied more than 18% this year, after scoring its best first half since 2019.