Stocks, Bonds, Gold And Oil Soar As Dovish Fed Comments Trample Israel War Fears

Over the weekend, we alerted readers to a change in market sentiment after a short-squeeze on Friday. Goldman Sachs' prime brokerage warned that long-only sellers were exhausted and hedge funds were starting to cover their short positions. This, along with the shortest Commodity Trading Advisors (CTAs) on record and positive dealer gamma, indicated that there could be further gains in the stock market, particularly in the most shorted names. Despite concerns over the deadly clash involving Israel, stocks reversed early weakness and surged higher, pushing all sectors from deep red to green. The Goldman most-shorted basket also rose for the fourth consecutive afternoon, causing increasing concern among hedge funds with short positions. Additionally, the Put-Call ratio hitting its highest level in 2023 led to hedged traders liquidating puts and a subsequent drop in the VIX. The VIX has now closed below 20 for nearly 100 sessions, the longest stretch since October 2018. The S&P delta flow was lifted by 0DTE punters, ensuring a positive close for the day. The driver behind this market surge was not the war in the Middle East, which led to an oil buying spree, but rather the liquidation driven by the Department of Energy's manipulated gasoline demand number. This manipulation was evident in the DOE's gasoline demand print, which was the biggest outlier on record compared to ethanol-implied gasoline demand. This is yet another example of the DOE attempting to lower oil prices by adjusting the underlying data.