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SHORT INTEREST FALLS TO LOWEST LEVEL SINCE 2007

15 September 2009 by Cullen Roche 5 Comments

Fuel for the rally could be waning as short sellers lose confidence and cover their positions.  Bespoke investments reports:

It just keeps getting lonelier on the short side.  As of the end of August, the average short interest as a percentage of float for stocks in the S&P 1500 stood at 6.6%, representing the lowest level since February 2007.  Over the last six months, the balance of power has shifted from the sellers to buyers.  With the short side now being the loneliest trade, will the roles reverse again over the next six months?

SI

Cullen Roche

Cullen Roche

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Comments
  • Eric

    S&P will close below 1000 this Friday. I caught heat on the board for saying go long at 995 in early september. This feels like a final blow off. Good luck all.

    09/15/2009 at 12:44 PM
  • dorky

    Academic studies have shown that short sellers are among the most savvy traders. Note that they went heavy short into the crash and scaled out afterwards. Their lack of short length is a bullish intermediate-term sign, although the absence of short covering will exacerbate short run declines.

    09/15/2009 at 1:12 PM
  • Eric

    I would say the lack of short interest could set the table for a major one day decline very soon. On a side note I wonder how Geithner will boast to the public about the govt investment of C when that is trading sub 3.25 in the next month.

    09/15/2009 at 1:20 PM
  • TAW

    I was short and now am long. I don’t know if shorters are more savvy but I think we are the more nimble type. Once the tide turns, we will turn too.

    09/15/2009 at 3:59 PM
  • Phanta

    Dorky,
    short-sellers may *have been* savvier before, but shorting has become a lot more popular among retail traders. Especially after all the inverse ETFs became so mainstream.

    09/15/2009 at 6:46 PM