The short base is back.

After a prolonged period where it didn't pay to be short, that it was dangerous to be short, you can see the footprints everywhere, and the footprints are devastating for those in them.

You see once again, the hedge funds were too clever by half. One of the first things that happens, psychically speaking, is that hedge fund managers often make one of the most classic mistakes imaginable.

Let's say they are short volatility because it has been good and because they believed it was a "class" like real estate or stocks or gold or bonds. They didn't know how many others had adopted that strategy so they didn't know how corrupted the machinery was.

Their first reaction, typically, is not to unwind the trade. That admits defeat and part of the idea of a being a hedge fund manager is you think you are better than anyone else or you would still be where you were before you went out on your own.

So instead of unwinding and going into cash to preserve your franchise, what you do is say, okay, I am long the S&P and short Vol, which not only sounds cool and is appealing to silly institutions and wealthy individuals drawn to strategies they don't know which seem to have a lot of reward and little risk, but I also have a chance to really prove my bona fides by going short the worst of the S&P to preserve my hedge.

So, quick thumbnail: I am short volatility by writing what look to be very liquid calls on all sorts of volatility derivatives, and I am long the S&P. Now the S&P is coming under attack so what I will do is short the worst stocks in the market, worst being defined by the ones that will do the worst in a rising rate tape.

Now for some that means shorting Reits and Utes, which is a decent hedge to the hedge.

But for others it means finding the most overvalued stocks in the market and betting against them.

Right now after these funds were short the calls or the futures on volatility and now realize that the instruments couldn't absorb their covering, they have to deal with the coverage of the wrong shorts, or shorts that went awry.

So let's go over some classics. Few stocks seem more overvalued than the social media stocks. Facebook's (FB) under attack from those who say that it is for fuddy duddies and that they all like Instragram, which, by the way is still Facebook. But the trends are bad. I think this is ridiculous because Facebook's stock now reflects all the weakness. But you saw it break down to the low 170s and that was a combination of trapped longs and shorts shooting against them. Oh well.

They were also short two classically overvalued social media stocks: Twitter (TWTR) and Snap (SNAP) . Why not? Both were doing poorly. Turns out that was no longer the case. So the shorts crushed them.

They tended to be short the most expensive Amazon competitors. Number one on the short-list? Wayfair (W) . Turned out to be a real bad short because there's an endless sellside claque that keeps supporting it.

Then there's FANG. Those who wanted to hedge the most vulnerable names came after this group with a vengeance, shorting the common, shorting the calls, and using the ETF to blast these to kingdom come. Why not? Netflix (NFLX) seemed played out. Alphabet (GOOGL) missed. Amazon (AMZN) ? Too high. And the problematic Facebook.

The stocks, however, proved resilient and the tactic failed. Plus the FANG-related ETFs-there are a bunch-often included stocks like Salesforce (CRM) , Workday (WDAY) , Red Hat (RHT) , Adobe (ADBE) , Square (SQ) and VMWare (VMW) . Take a look at those yesterday. They all surged. That's the last part of the short unwind.

Now I am not saying that everything was fallout to the VIX/VOL broken strategy. I am saying that when the market got choppy this is what the hedge funds went after.

It was disastrous.

Now it is ending with the biggest bang of all: the rally in Apple (AAPL) . How could you not go after the biggest and what they think is the worst because of the I-Phone X bust -- not that we are even sure of that.

Well, Buffett's star is as in ascendance as that of Bezos. Worse, all of the analysts who turned on Apple right here or below, said nothing yesterday. They were afraid. They had nothing new and they were afraid. They didn't want to go against the icon.

So the short exploded in their faces.

That's where we are now. Typically this is the end of the line for the shorts. They have all been massacred, Valentine's Day style.

But we never know how many billions of dollars are devoted to this gameplan. Maybe even more than we think so we can keep rallying until we take out old highs, which is what is starting to occur.

One thing is certain, though, this is the other side of the trade.

How do I know this?

One of the great things about being around so long is that you can intuit these things. You know what the strategy is and why it will fail because you have seen hedge funds do these stupid things over and over again.

Now NOBODY will admit they did this. Who would possibly do so? It would hurt their principal reason for being: fees. There's defenders of all sorts of strategies because fees are on the line. Why hold up a sign that says " I did the wrong thing?"

But they did.

And just as they helped bring down the market and make a mockery of the asset class causing hundreds of billions of dollars to leave stocks, they also juiced the most overvalued stocks in the market.

What a bunch of dopes.

The good news? They are so stupid they will be blown out.

The bad news? We had to withstand their quiet so we didn't know what was going on, unless you've been one of them and you know how they think.

You just learned how they think.

Pretty funny, isn't it?