--- title: "Swift Pivot! After a Historic \"Short Squeeze Week,\" Hedge Funds Turn Bearish Again" type: "News" locale: "en" url: "https://longbridge.com/en/news/295355109.md" description: "Just as the short squeeze subsided, hedge funds quickly changed tack. Goldman Sachs' latest Prime Brokerage weekly report shows that after enjoying a week of rebound gains, institutions rapidly restarted short selling, with the ratio of short sales to long purchases in macro products reaching as high as 2.2 to 1. Financial stocks saw net buying for four consecutive weeks, while the seven-week buying streak in energy stocks came to an abrupt halt, reflecting highly polarized market sentiment. With CPI, PPI, and over $100 billion in U.S. Treasury Auction scheduled for this week, the battle between bulls and bears may intensify once again" datetime: "2026-08-10T03:48:19.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/295355109.md) - [en](https://longbridge.com/en/news/295355109.md) - [zh-HK](https://longbridge.com/zh-HK/news/295355109.md) --- # Swift Pivot! After a Historic "Short Squeeze Week," Hedge Funds Turn Bearish Again After experiencing the largest-scale short squeeze since November 2020, hedge funds completed a strategy switch in just one week, ramping up short selling efforts once again. Last week, nonfarm payrolls data that came in far below expectations unexpectedly became a market catalyst, triggering a broad rally in U.S. stocks. The S&P 500 Index hit its 26th record high of the year, fueling expectations for a September rate cut and allowing previous technical selling pressure to dissipate. However, **according to Goldman Sachs' latest Prime Brokerage weekly report, after this rebound cooled, hedge funds quickly pivoted, net selling U.S. stocks overall last week, with short selling volumes once again exceeding long purchases.** This rapid shift reflects the high instability of current market sentiment. After a brief emotional repair, institutional investors did not form a sustained consensus for going long. Instead, they chose to rebuild short positions, particularly concentrated in macro products and the energy sector. ## Short Squeeze Rally Quickly Subsides, Leverage Data Declines According to Goldman Sachs' Prime Brokerage weekly report, the market noticeably calmed down last week after undergoing the largest short squeeze since November 2020. The total leverage ratio of U.S. long-short funds dropped by 3.9 percentage points to 204.2%, placing it at the 6th percentile over the past year, indicating that overall risk exposure remains low. Meanwhile, the net leverage ratio rose slightly by 0.8 percentage points to 53.6%, located at the 60th percentile over the past year. The U.S. fundamental long-short ratio (by market capitalization) increased by 1.9% to 1.712, sitting at the 97th percentile over the past year. **Looking at the background that triggered last week's rebound, weak nonfarm payrolls data caused the probability of a September rate hike to plummet from near certainty to about 40%, with the market responding under the logic that "bad news is good news."** Earnings performances in the software and internet sectors were impressive. Atlassian (TEAM) surged 30% in a single week, Twilio (TWLO) rose 25%, and the IGV index overall gained about 3%, driving some short covering. Meanwhile, popular long positions in semiconductors generally faced pressure, with stocks like Micron and AMD declining. ## Macro Products Become the Main Battlefield for Short Selling, Single-Stock Flows Remain Flat In terms of capital flows, hedge funds overall net sold U.S. stocks last week, **primarily driven by short selling activities in macro products (combined index and ETF metrics).** The net selling volume of macro products reached -0.6 standard deviations over the past year, with the ratio of short sales to long purchases at 2.2 to 1. Short positions in U.S.-listed ETFs declined for the fifth consecutive week, with a month-over-month drop of 12%, mainly due to short covering in credit and large-cap ETFs. However, new short positions in small-cap ETFs partially offset the above covering effect. For individual stocks, net flows were basically flat, with long purchase and short sale volumes roughly equivalent. Notably, total single-stock trading volume last week was the highest in nearly seven weeks, with trading activity increasing in 10 out of 11 sectors (excluding Information Technology). Financials, Communication Services, Healthcare, and Materials were the sectors with the largest net buying, while Information Technology, Industrials, Consumer Discretionary, and Energy were the sectors with the largest net selling. ## Financial Stocks See Net Buying for Four Consecutive Weeks, Energy Stocks End Seven-Week Buying Streak The financial sector was one of the U.S. sectors with the largest net buying by hedge funds last week and over the past month. **Goldman Sachs data shows that hedge funds have net bought financial stocks for four consecutive weeks, with a buy-to-sell ratio as high as 3.8 to 1, and net buying intensity reaching +1.0 standard deviations over the past year.** Breaking it down, trading and payment processing, and capital markets (exchanges and data, investment banking and brokerage) were the sub-sectors with the largest net buying this week, while banks and insurance were the sub-sectors with the most net selling. In terms of relative weights, hedge funds' overweight position in financial services (including capital markets and trading/payment processing) is currently at its highest level in three years, while the underweight position in insurance is the deepest in three years. The relative weight of banks is at the 35th percentile over the past three years. In the energy sector, after seven consecutive weeks of net buying, there was a slight net sell-off last week, with net selling intensity at -0.4 standard deviations over the past year, and a short-to-long ratio of approximately 4 to 1. Integrated oil & gas and oil & gas storage and transportation were the sub-sectors with the largest net selling, while exploration and production, and drilling and equipment services saw net buying. Nevertheless, the proportion of net exposure to U.S. energy stocks to total U.S. net market value still reached 4.0%, sitting at the 95th to 98th percentiles over the past year and three years. The sector's overall long-short ratio was 1.87, at the 99th to 100th percentiles over the past year and three years, indicating that overall positions remain relatively bullish. Market attention has now shifted to this week's dense macroeconomic calendar. The July CPI data released on Wednesday will be the core focus, with market expectations for core CPI to rise 0.2% month-over-month and 2.5% year-over-year. PPI data will be released on Thursday, followed by retail sales data on Friday. Meanwhile, the U.S. Treasury will auction $58 billion in 3-year notes on Tuesday, $42 billion in 10-year notes on Wednesday, and $25 billion in 30-year bonds on Thursday. Supply pressure cannot be ignored. ### Related Stocks - [.SPX.US](https://longbridge.com/en/quote/.SPX.US.md) - [GS.US](https://longbridge.com/en/quote/GS.US.md) - [TEAM.US](https://longbridge.com/en/quote/TEAM.US.md) - [TWLO.US](https://longbridge.com/en/quote/TWLO.US.md) - [IGV.US](https://longbridge.com/en/quote/IGV.US.md) - [MU.US](https://longbridge.com/en/quote/MU.US.md) - [AMD.US](https://longbridge.com/en/quote/AMD.US.md) - [W4VR.SG](https://longbridge.com/en/quote/W4VR.SG.md) ## Related News & Research - [The Federal Reserve Just Released Its August Inflation Forecast, and It Could Put the FOMC on a Collision Course for Its September Meeting](https://longbridge.com/en/news/295336456.md) - [LIVE MARKETS-From inflation fears to growth fears](https://longbridge.com/en/news/295427746.md) - [Dell (DELL) Stock Looks Reasonable Following Its 9x Five Year Run](https://longbridge.com/en/news/295427615.md) - [Nvidia-Backed Lumentum Soaring Again: Will It Rise or Fall After Earnings?](https://longbridge.com/en/news/295343373.md) - [LIVE MARKETS-From FOMO to FOTO](https://longbridge.com/en/news/295433426.md)