“In these circumstances you see hedge funds becoming a bit more cautious around turning points in the market, reducing their exposure before any significant trend forms,” she said. “Large short exposures have been brought back over the last few months because hedge funds have been under a lot of pressure.” Seasonality could also be playing a role as hedge funds wind down for the summer. The market is not in a rational state By sector, consumer discretionary stocks such as Domino’s Pizza and e-commerce retailer Kogan were the largest beneficiaries from the short interest reduction, driven by expectations that headline…