5 replies to this topic

[Tor]

Ok, I want to admit, I really didn't want to post this. Why - I hate meltup calls and I have been a perma bear. We are at resistance and everyone can see the economy going into decine/slowdown. But look at this, I found it amazing. The short interest now is that seen at major lows! what does a trader do in this situation? I havent got a clue. I simply cant do any longs here myself as I have to keep telling myself we are at resistance, but it is amazing this sohrt interst and I wanted to post it. Objectively speaking it is the bulls dream. But good luck to one and all. If the dollar bounces then market will fall IMO. But how have investors and Wall Street reacted? By piling on more pessimism. The New York Stock Exchange (NYSE) recently reported short-interest activity for April, revealing a jump to another record. In fact, from March 15 through April 13, the number of shares short on the NYSE increased by 4.6 percent. During that same time frame, the SPX gained nearly 4.4 percent. A bit of history should give you healthy perspective on the current short interest situation. The NYSE short-interest ratio (total short interest divided by average daily trading volume) stood at 3.7 when the SPX peaked around 1,500 in early 2000. This is a noteworthy fact as the SPX closed Friday fewer than 16 points away from this round-number area. (As a side note, the equal weighted SPX crossed above 2,000 this week and is trading at an all-time high). With the NYSE short-interest ratio currently at 6.1, this is consistent with the level of shorting activity that took place during the mid-to-late 1990's rally in the market and also the level of shorting activity that occurred as the market carved out its bear market lows in 2002-2003. Each of these periods were favorable for accumulating stocks. But how have investors and Wall Street reacted? By piling on more pessimism. The New York Stock Exchange (NYSE) recently reported short-interest activity for April, revealing a jump to another record. In fact, from March 15 through April 13, the number of shares short on the NYSE increased by 4.6 percent. During that same time frame, the SPX gained nearly 4.4 percent. A bit of history should give you healthy perspective on the current short interest situation. The NYSE short-interest ratio (total short interest divided by average daily trading volume) stood at 3.7 when the SPX peaked around 1,500 in early 2000. This is a noteworthy fact as the SPX closed Friday fewer than 16 points away from this round-number area. (As a side note, the equal weighted SPX crossed above 2,000 this week and is trading at an all-time high). With the NYSE short-interest ratio currently at 6.1, this is consistent with the level of shorting activity that took place during the mid-to-late 1990's rally in the market and also the level of shorting activity that occurred as the market carved out its bear market lows in 2002-2003. Each of these periods were favorable for accumulating stocks. In other words, despite the fact that the market may look "tired" or "overbought" from a technical perspective on a chart, the short-interest ratio continues to stand at levels consistent with bullish price action, which favors the bulls and suggests that any corrections will continue to be modest and short lived, unless and until we see a major capitulation in the short interest like that of early 2000. As further evidence of skepticism that should ultimately provide fuel for a continued rally, let's turn to the latest Commitment of Traders report, which is published weekly. Coming into last week, small traders of S&P futures netted the largest short position in the past five years. Furthermore, large speculators in E-mini S&P futures (which some suspect are hedge funds) also netted the largest short position in five years. In both cases, these groups have been caught short preceding huge rallies in the market, and history seems to be again repeating itself. As we saw in May 2006, this level of pessimism from traders does not mean the market is "correction proof," but keep in mind that the magnitude of the correction in 2006 was shallow with respect to the post-correction price action in 2006.

[johnmc]

All it took was a little help from the US Treasury to keep it moving along. I'll wait until the repo market comes down before considering shorting again.




http://jessel.100meg...reasuryRpos.png

[redfoliage2]

All it took was a little help from the US Treasury to keep it moving along. I'll wait until the repo market comes down before considering shorting again.




http://jessel.100meg...reasuryRpos.png

Can't agree more and this picture is worth 24K words.

[spielchekr]

I'm doing my part to boycott shorting.

[n83]

All it took was a little help from the US Treasury to keep it moving along. I'll wait until the repo market comes down before considering shorting again.




http://jessel.100meg...reasuryRpos.png

how does that chart extend to May and 5/15? is it from last year?

[johnmc]

All it took was a little help from the US Treasury to keep it moving along. I'll wait until the repo market comes down before considering shorting again.




http://jessel.100meg...reasuryRpos.png

how does that chart extend to May and 5/15? is it from last year?

It is for this year. May 15 is currently the latest maturity date for the announcements.
http://fms.treas.gov/tip/reports.html
As you go through the links for the daily auctions you can add and subtract the amount outstanding for the maturity dates. This is short term money looking for a home.
Hope this helps.