Short Interest Hits New Record High On NYSE

[Tet]

NYSE short interest rose 6% in June to another record high. While the increased influence of hedge funds over the last several years has made short interest a less important indicator, it is still important to note that over the last four months short interest has increased by 30%.



http://seekingalpha.com/wp-content/seekingalpha/images/short_interest.png


http://usmarket.seekingalpha.com/article/39118?source=d_email&u=61736
I don't recall reading in our very benevolent, free press the words Short and Puts back in the Go, Go Bubble Dayz of March 2000 like I do today. One thing I know about our very helpful, friendly, courteous and kind Main Stream Media is if you do what they tell you to do, you end up getting your ass handed to you on a plate. Teaching cows how to place puts and bet the market short is a sure fire way to get a lot of blood in the streets. Looks more like we've got a Bubble in Short Interest and once it pops I'd say Mr. Market heads a whole lot higher. Nothing gets the market headed higher like the sound of shorts covering their misguided bets, to the moon we go.

[DemonD]

Tet, those are total numbers of shares. Is there a number that is a percentage of total outstanding shares? I mean it's likely there are a lot more shares right now, so you'd have to go by percentage short interest. And some of the comments there make sense - how much of that is naked shorting, how much of that is derivative driven from long/short bets, how many people have been buying puts on stocks they are going long on to hedge their bets, etc. Remember there are a lot more people trading now, a lot more tools, a lot more trading platforms and websites, so if that is just based on volume, you could chalk it up to volatility with a lot more people trading right now.

[Tet]

Tet, those are total numbers of shares. Is there a number that is a percentage of total outstanding shares?

The amount of shares being either created or destroyed on the NYSE is what it is, this ratio goes up it goes down there is nothing unique about the total number of shares today as compared to 1991.

I mean it's likely there are a lot more shares right now, so you'd have to go by percentage short interest.

The chart clearly is only volume of short shares, these are the best types of charts to go by, no bullshit involved to read through. Backtest this chart and clearly you see that it works. The drop off in volume of short shares goes lower heading into the March 2000 blowoff top, obviously as shorts are either forced to cover or decide to take profits the market will head higher.

http://seekingalpha.com/wp-content/seekingalpha/images/short_interest.png


And some of the comments there make sense - how much of that is naked shorting, how much of that is derivative driven from long/short bets, how many people have been buying puts on stocks they are going long on to hedge their bets, etc. Remember there are a lot more people trading now, a lot more tools, a lot more trading platforms and websites, so if that is just based on volume, you could chalk it up to volatility with a lot more people trading right now.

My, my, my who to believe and what to do. We have reached a point where the news can tell you it's raining and we go outside and believe it's raining when it's not. The Chart is the Chart, it is what's going on it tells the whole story and nothing but the story, not the bullshit commentary that the idiots make-up and post, or the hypsters post to get you to bet the wrong direction.

First and foremost, has the Chart changed? The Chart shows Volume for shares short on the NYSE. Did this chart measure something different in 1991 than it does today? Is this like a DOW chart that shows different components or a BIS unemployment chart where the definition of unemployment has changed? The Chart is clearly the same as it was in 1991.

Chart points to blow-off top, 6% monthly change would say it's mania so it could head even higher and probably already has. There is only one way for a short to profit and that is to cover, remember who pays dividend on a short is the holder of the short so there's many other reasons to cover and not a whole lot of reasons to hold. All the comments that this time it's different that get attached to this article at the source only make me laugh. When these shorts start covering and these shorts are without a doubt going to start covering, the market heads a hell of a lot higher. In three weeks maybe the reason will be earnings surprises or maybe the Fed gives a little gift to the market in the form of a cut. Doesn't really matter how the MSM explains the rise in the market, this chart clearly shows it's coming.

[Jim Nickerson]

Tet, I think I am seeing your rationale here, but as I study the chart, it seems to me there were record shorts in ~1998, which then apparently covered as the market continued to the 2000 tops which were in March and almost as high in Sept if I remember correctly using the SPX. Then even though the markets collapsed, the number of shorts expanded (doubled or more) during a down market.

Question why did shorts go up so much during the down market? As they did so, at any point after they eclipsed the 1998 highs one could have said the market is "bound to go higher as the shorts have to cover," but that certainly did not happen for well over a year as the markets continued down.

I don't doubt your interpretation, but it is possible that this time the shorts could be correct? If history were they were never correct, it seems shorting wouldn't exist.

[DemonD]

I see what you are saying, 6% in one month. Well, we'll just see what happens eh?

[Tet]

Tet, I think I am seeing your rationale here, but as I study the chart, it seems to me there were record shorts in ~1998, which then apparently covered as the market continued to the 2000 tops which were in March and almost as high in Sept if I remember correctly using the SPX. Then even though the markets collapsed, the number of shorts expanded (doubled or more) during a down market.

Question why did shorts go up so much during the down market? As they did so, at any point after they eclipsed the 1998 highs one could have said the market is "bound to go higher as the shorts have to cover," but that certainly did not happen for well over a year as the markets continued down.

I don't doubt your interpretation, but it is possible that this time the shorts could be correct? If history were they were never correct, it seems shorting wouldn't exist.

Not quite sure how an overlay of the SPX works out or why that would be the comparison you'd want to draw. This chart refers to the NYSE and yet you bring NASDAQ stocks into your comparison with the SPX. Any index you overlay is a price comparison, this is a volume comparison. How does one go about comparing a Jan. 2000 1469 SPX with a Jun 22 1502 SPX? The d0llar in Jan. 2000 was at 120 and the d0llar today is at about 82. I think you'd need to find a $NYA chart measured in constant d0llars to overlay on this chart for comparison. I'm not sure where someone would find that bit of information.

I would think the arguments to make would be the short volume continues to increase, naked short selling continuesbecause if there is any significant change in direction the market can only go higher with that much short covering. I can't imagine how high it goes with naked short covering, the only downside to the upside for the Bulls is are these Hedge Funds going to have the money to pay-off their shorts when they start getting creamed. Who knows, maybe the Fed changes the margin requirements for the market, that could really set things off.

I look at the chart and it screams out to me that the direction in volume is going to change pretty soon. I don't think there can be any doubts what happens to the market when the shorts are forced to cover. What creates short covering? Dividend pay-offs could get it rolling, Fed cut definitely gets the shorts covering, made-up surprise earnings news in the next three weeks could get the shorts covering or a change in margin requirements could get them started. For me the Bull case looks better than the Bear case. With that said, I'm long the market (2 stocks) so maybe it's just wishful thinking on my part.

All I know is people that know little to nothing about the market, money, or scams want to either buy puts or short shares. I see no other outcome but disaster for people who view the market as an investment, not a casino.

[Tet]

I see what you are saying, 6% in one month. Well, we'll just see what happens eh?
Looks to me like someone is trying to paper over their losses with more shares. Makes me wonder who is left holding the bag, I would have to think that the Morgan Stanley Boyz and the Goldman Sux folks have to view many of these Hedge Funds as competitors. If they were my competitor and I had the righthand ear of G_d at the Federal Reserve, like the Morgan and Goldman boyz do, I know what I'd do to them. Rule Number One when playing in this casino is never bet against the Fed and it would appear that many of these Hedges did just that.

I think we find out pretty soon and the Fed is going to create max pain to these Hedges, driving up short term rates like they're doing right now must be pretty painful to those trying to borrow to short more shares.

I believe we're all going to learn a little lesson, looks like the sharks are getting ready to start eating each other, we're about to find out that there's something that some of these very, very, very rich hedge fund investors own that the Federal Reserve wants to take away from them. I wonder what the collateral is backing all these short shares, if it's property it looks like the Fed will be taking it away at bargain prices. Somebody is about to get screwed, I wonder who it is. The Fed has definitely created Max Pain for somebody, just glad it wasn't me.