Friday, July 30th, 2010

Market Signals: NYSE Group Short Interest as of January 15, 2010

January 30th, 2010 at 4:58 am by CB | No Comments

The chart below tracks the number of shares that NYSE members and member organizations have reported short on a schedule of past dates. Twice a month short information is released by the NYSE Group to the public. As of January 15, 2010, 13,347 million shares were short, an increase of 364 million shares – or 2.8% – from December 31, 2009. During the chart’s observed period, the number of shares short peaked on July 15, 2008 at 18,608 million shares. The current level of shares short would have to increase 39.4% to reach the July 15, 2008 peak. Nevertheless, the nadir of shares short occurred on October 15, 2007 at 11,655 million shares short. The current level of shares short would have to decrease 12.7% to match the previous nadir.

Observing the chart below, one can conclude that at times the shares short appears to be a lagging indicator, which reduces its influence in predicting the future. Yet, in no way would CB ever rely on just one indicator or fundamental factor to make a prediction.

Nevertheless, given this indicator’s peak during the observed period, there appears to be room for a significant amount of additional shorting, which would mean more selling pressure on equities. Again, this is a factor to monitor and consider, but not to make a decision on. If these shorts are covered to the nadir, and there is nothing saying they can’t be covered below that point, the additional buying pressure won’t be as great as it has been in the past. Basically, the potential magnitude of impact to the general market is higher from the increased shorting than from increased covering.

While CB has not stated a market forecast above, readers should know that CB holds a position in SDS at the time this post was written.