22Mar1:24 pmEST

A Squeeze Play with Two Outs

From a contrarian perspective, it is interesting to see the timing of the new "Short Squeeze" ETF, SQZZ, open for trade today. 

First, some background, via BusinessWire.com

ETF industry veteran Brad Lamensdorf launched today The Active Alts Contrarian ETF (NASDAQ: SQZZ), a first-of-its-kind actively managed ETF that seeks capital appreciation by investing in companies with solid fundamentals that have very large short positions and are subject to a short squeeze. Also, as a secondary investment strategy, Lamensdorf intends to lend out the hard-to-borrow securities in an effort to earn a stream of monthly income which has the potential to enhance the total return.

Clearly, this ETF is geared towards those with a bullish view of the market. The basic premise for the ETF seems like a great idea and, frankly, is long overdue. 

But therein lies the rub, since contrarians will likely flock to this new ETF as a surefire sign of a bull run too long in the tooth. After all, if an ETF can now streamline the short squeeze play, which tends to work terribly in bearish or corrective markets (heavily-shorted socks tend to move downhill twice as fast as they squeeze shorts higher) but brilliantly in bull markets, then it cannot really be that easy for longs, can it?

To use the baseball analogy of the "squeeze play," bears will argue this new ETF amounts to a squeeze play executed with two outs in the inning, a far riskier endeavor. 

The jury is out for now. But this is surely something we will look back on as being a "tell" if we do see more market weakness in the coming weeks and months. 

As for the actual price action of stocks today, the small cap weakness is not bringing everything down again, as the Nasdaq is in a tightly-ranged bounce.

More in my usual Midday Video for Members.  

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