Short Selling Fall to Correct, Time to Buy Wall St, FAS
Direxion Daily Finan. Bull 3X Shs(ETF) NYSE:FAS
Shorts will be squeezed out as the market recovers and this will lead to good gains as investors are forced to buy to unwind their bets.
Considering the almost record level of short selling of late the market has hung on very well. Some stocks have been oversold, mostly financials and Direxion Daily Finan. Bull 3X Shs(ETF) NYSE:FAS rates as a strong buy today.
Short interest on the NYSE rose 2.17 percent to 13.22 billion shares through May 31, from 12.94 billion shares as of May 13.
Short interest on the Nasdaq rose 3.41 percent in the second half of May to 7.25 billion shares, from 7.01 billion shares as of May 13.
Investors who sell short seek to profit from falling stock prices by borrowing shares and then selling them in the hope of buying them back at a cheaper price while pocketing the difference.
The Data Explorers U.S. Equity LongShort ratio, which shows whether the market is getting more or less short, stood at 12.85 on June 7. The ratio is off its six year high of 13.30 recorded on May 12, meaning that there are almost 13 times more longs in the market than shorts.
The ratio, computed each business day, looks at the value of stock on loan, a proxy for short-selling activity, which stands at $292 billion. This is contrasted with the value of stock available to be borrowed, at $3.75 trillion. Both figures are as of June 7.
Data Explorers data shows over 6% of the total shares of Chinese stocks listed in the US are currently out on loan. The figure for LinkedIn, is 14% of the free float. LinkedIn declined to comment.
Over the period covered by the latest short-interest report, the Dow Jones Industrial Average fell 25.96 points, or 0.21%. The Nasdaq Composite Index increased 6.83 points, or 0.24%.
The short ratio on the NYSE rose to 3.7 days from a revised 3.2 days during the same period. The Wall Street Journal uses average daily composite volume to calculate the short ratio.
Although a substantial short position reflects heavy speculation that a stock’s price will decline, some investors consider an increase in short interest to be potentially positive because the borrowed shares eventually must be bought back.
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Shayne Heffernan
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.
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