Markets Are Recovering, But Is Anybody Happy?

After one of the worst opening months on record, the S&P 500 has roared back in 2016 and is now sitting at 2100, near its highest point in six months. Just a few months ago, headlines that a recession was imminent and a bear market had already begun were everywhere. Now, the SPDR S&P 500 ETF Trust SPY is up 3.0 percent on the year.

Ritholtz Wealth Management's Joshua Brown says traders are more frustrated and angry with the resiliency of the U.S. stock market than ever before.

“The 14.5% rally off the February lows, on nothing but worsening earnings and cuts to GDP forecasts has people utterly furious,” Brown writes.

“I think a lot of this stems from the seeming disconnect between a sluggish economy and record high stocks," he notes.

"People who did something to protect themselves – selling, shorting, hedging, etc—are absolutely furious.”

There are plenty of people who fall into this category of frustrated traders. Earlier this month, Credit Suisse reported that the derivative traders were making nearly entirely bearish bets.

Related Link: The Derivatives Market Is Betting Almost Exclusively On A Selloff

Ironically, for frustrated investors that see no logic in the S&P 500 surge, the amount of downside bets is likely one of the major driving forces behind the surge. Every point higher that the S&P 500 climbs triggers more and more short covering by traders betting on a fall.

At its current level and in the current set of circumstances, the S&P 500 could be poised for either a massive short squeeze or a violent selloff in coming weeks.

Disclosure: the author holds no position in the stocks mentioned.