Tuesday, February 12, 2008

Not a Short-Covering Rally

The rally from the January lows to early February was due largely in part to short covering. With that in mind, we checked to see if today's rally was being led by the most heavily shorted stocks. Surprisingly, today's gains are being led by stocks that have the smallest amount of short interest as a percentage of float, while the most heavily shorted stocks are up the least. Either the shorts are holding strong on their positions or they don't have nearly as much to cover as they did earlier in the month.

In the chart below, we broke up the Russell 1,000 into deciles (ten deciles of 100 stocks) based on short interest as a percentage of float. We then calculated the average percent change on the day of stocks in each decile. As shown, the decile of the most heavily shorted stocks is only up an average of 0.42%.

Shortinterest212


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Lunch is for wimps

Lunch is for wimps
It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another.