Thursday, May 28, 2009

Short Sales on S&P 500 Reach 3 Month Low

For the contrarian investor the headline alone has to raise an eyebrow... from personal experience except for 1 week in the past 10 all efforts to short have been met with a bright explosion of light. That of a speeding train just before it ran me over. I can understand the positioning because all long side gains have been quickly wiped out by almost any sensible short hedging. That said, at some point when everyone has "turned" coat from short to long - the market will usually inflict the most pain and reverse. But I've been thinking that for a month now - it's been right to buy all dips, and with 2 hands outstretched for a long time. We'll see if this complacency finally blows up on the die hard bulls.

Via Bloomberg
  • Bets against stocks in the Standard & Poor’s 500 Index fell to the lowest level since Feb. 27 as investors reduced short sales on technology companies including Microsoft Corp. and Cisco Systems Inc.
  • The number of S&P 500 shares sold short dropped 1.7 percent to 9.87 billion shares on May 15 from 10 billion on April 30, according to exchange data compiled by Bloomberg. Technology had the biggest decline among 10 industries, with short interest falling 6.3 percent to 1.49 billion shares. Banks and other financial institutions experienced a 3.2 percent decrease to 3.37 billion shares.
  • Investors turned more bullish after the S&P 500 completed the steepest nine-week rally since the 1930s, surging 37 percent through May 8.
  • Shares sold short for Redmond, Washington-based Microsoft, the world’s largest software maker, fell 29 percent to 56.5 million shares. At Cisco, the biggest producer of computer- networking equipment, the figure decreased 26 percent to 50.9 million shares.
  • Short interest in Sears Holdings Corp., the Hoffman Estates, Illinois-based department-store chain, dropped by more than half to 11.7 percent of float. The proportion also fell in half at AutoZone Inc., the auto-parts retailer whose headquarters is in Memphis, Tennessee.
  • As a proportion of shares available for trading, or float, short interest for the S&P 500 slumped to 5 percent as of May 15. It’s fallen from 5.6 percent on March 13 and 5.9 percent on July 15.
What's really amazing by that last statistic is how little money in the market is betting to the dark side; makes sense considering so much money is controlled in long only accounts such as mutual funds but 95%ish of money is long.

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