The current market setup offers promising opportunities for momentum (MOMO) strategies. One of the key signs of a strong bull market is when significant money moves not just within individual fluctuations but lifts the entire market along with its overall trend. This pattern appears to be unfolding, yet confirmation of a breakout in U.S. equities remains uncertain. Short squeezes will likely continue to drive market movements in the meantime.

A Painful Short Squeeze Ahead?

Tomorrow is expected to bring a challenging short squeeze, as risk assets appear set to rally aggressively. The cryptocurrency market is already showing signs of early strength over the weekend, pointing to a potentially volatile session. Over the weekend, several significant developments unfolded:

• Putin pushes to restart Nord Stream 2, leading to a potential backlash from U.S. allies.
• U.S. tariffs on Mexico and Canada could be lowered to below 25%, with an expected boost to the energy sector.
• Germany is swiftly moving to adjust spending towards special funds for defense and infrastructure.
• Beijing and Washington’s interactions remain in flux, with key developments including tariffs, policy changes, and discussions on Xi Jinping’s path-dependent economic strategy.

Bitcoin and Risk-on Assets Leading the Charge

A new month starts with strong risk-on sentiment. Bitcoin surged 20% from Friday’s lows, signaling that speculative assets are gaining traction. Markets will be looking for opportunities to exert maximum pain and force short sellers to cover, further fueling upward momentum in equities.

Key Market Movements from February

February ended on a strong note, despite some pullbacks. Notable trends included:

• Gold: Surged by $3,000 before giving back $100 in the final week.
• Equities: The market hit all-time highs mid-month before experiencing a minor correction in the final weeks.
• Tech Stocks: U.S. tech shares remained in focus, climbing 18% on February 18th before closing 10% higher for the month.
• U.S. 10-Year Treasury Yields: Dropped from 4.60% on February 11th to 4.20% at the month’s close, reflecting increased demand for bonds.

As March kicks off, traders will be closely monitoring risk sentiment, inflation data, and central bank signals. With markets positioning for volatility, short squeezes could further amplify price swings. Investors should remain cautious yet opportunistic, as the shifting landscape presents both risks and rewards in the coming weeks.