While Roaring Kitty's daytrading army still enjoys squeezing prominent heavily shorted slow-motion trainwrecks - the recent spike and recapitalization at Gamestop and AMC being the most notable examples - the reality is that heavily shorted stocks are now few and far between because as JPMorgan's Nick Panigirtzoglou writes in his latest Flows & Liquidity note (available to pro subscribers), "the short interest on SPY and QQQ ETFs has been making successive record lows", and is dragging down the broader market's short interest down with it. More importantly, the incredibly shrinking marketwide short interest has been - according to the JPM trader - one of the biggest drivers been "providing a steady flow support to US equities over the past year helping to suppress volatility, thus acting as an implicit short vol trade."

And while this relentless drop in short interest has been a boon to risk assets so far, the upcoming end of more shorts to squeeze, "poses vulnerability to US equities in a scenario were negative news start reversing the past year’s decline in short interest" according to Panigirtzoglou.

Let's take a closer look at these claims.