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Note from MD: Shorts pile on and markets dip as volatility spikes

Markets have largely been sold off over the past week, but the potential sources of downward pressure are quite peculiar. The S&P 500 has dropped 4%, while the ASX 200 has let go of 2%. The VIX has jumped to around 19, as volatility enters the market again.
Markets have largely been sold off over the past week, but the potential sources of downward pressure are quite peculiar. The S&P 500 has dropped 4%, while the ASX 200 has let go of 2%. The VIX has jumped to around 19, as volatility enters the market again. Goldman Sachs pointed out that the amount of shorting in US equities since mid-August is the largest in six months and ranks in the 98th percentile for the past decade. At the same time, high levels of short gamma have resulted in dealers having to sell delta as the markets move lower, which has added pressure to the index’s. This could easily work the other way, where a reversal could force the dealers to buy back the delta they have recently sold.
In the U.S markets, the 4-week moving average has continued to surge over the past few months, as the reality of the Fed keeping rates higher for longer starts to weed out companies that aren’t in great financial shape.
More M&A activity is starting to flood into the lithium sector. The industry has maintained strong liquidity throughout an extended period of uncertain markets, and Gina Rhinehart’s recent aggressive buying of Liontown Resources Ltd (ASX: LTR) have only spurred excitement. She recently pumped another $132 million into the lithium developer in the wake of Albemarle’s attempted takeover, which could be laying the groundwork for an almighty battle. This takes her stake to well over $600 million in the company. Lithium Power International Ltd (ASX: LPI) has called in Canaccord to help it defend itself from the Chilean government’s mining group, Codelco, as it circles their project for a potential acquisition. The flagship operation is located in Chile’s golden triangle and is expected to produce over 15kt of lithium carbonate a year. 
The XJO continued to trend lower this week, and it is today trading around just above 7,020. It is still well above both its 52 week low of 6,411, and just above its 13 week low of 6,998. 
The XJO was sitting around 7018 just before 2pm – a noticeably lower than its 200 day weighted moving average of 7229 and a  bit lower than its 50 day weighted moving average of 7197. The index’s 52 week high currently stands just over 7567. Reach Markets provide sophisticated, professional and institutional investors with placements, convertible notes, pre-IPO and IPO investment opportunities. Our ability to deliver corporate advice, deal structuring and reliable growth capital is allowing us to secure access for our network to invest alongside some of Australia’s best known investors. We have some interesting opportunities in the rare earths, gold, technology and healthcare industries in the pipeline. Click here to be on the shortlist and receive updates as they become available. You should only act on the information we provide if you are confident that you fully understand what you are doing. Past returns do not always indicate future returns, and it is also possible to make significant losses. There is always a risk of loss when investing.
 

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