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NYSE Short Interest Hits New High

Posted By Barry Ritholtz On July 20, 2007 @ 7:16 am In Data Analysis,Markets,Psychology,Short Selling,Technical Analysis | Comments Disabled

I am up in Maine this weekend at Leen’s Lodge, courtesy of David Kotok’s annual economic summit/fly fishing event. Participants are here from as far away as Chile and Scotland, but its mostly a domestic affair. More than a few names you might know are here: Jim McTeague of Barron’s, BCA research economist Martin Barnes, John Silvia, chief economist of Wachovia, and a soon to be arriving Fed official.

On point to a conversation we had last night is the latest short interest data [1]:

"Short-selling activity rose to a fifth consecutive monthly record at the New York Stock Exchange as interest-rate jitters roiled the market, then gave way to optimism about earnings and the economy.

For the monthly period ending July 13, the number of short-selling positions not yet closed out at the NYSE — so-called short interest — rose 3.9% to 12,950,726,148 shares from 12,467,283,409 shares in mid-June.

Marketwide, the short ratio, or number of days’ average volume represented by the short positions outstanding at the exchange, rose to 8.4 from 8.0."

Over too much Scotch late last night, we had an interesting
discussion last night about the meaning of Short Interest/Margin Debt
expansion: How much of the increased short interest is due to the new
130/30 or 120/20 long short mutual funds? 

The mutual fund attempt to
create a product that is competitive to what hedge funds are doing may
be a source of the increased short interest. 

I have no idea how much cash is in these 130/30 funds, but I have to guesstimate it in the 100s of billions of dollars.

Might that be a cause of some of the short interest increase? For those who track short interest as a sentiment measure, these funds could be significantly impacting their metric.


I’ll have a few posts up later, but I will be out on "Big Lake" within the hour . . .


NYSE Bearish Bets Hit Another High [1]
WSJ, July 20, 2007; Page C8

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[1] short interest data: http://online.wsj.com/article/SB118489544052672400.html

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