PUBLIC SHORT RATIO (DE-TRENDED)

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APPLICABLE TIME FRAME(S):  

INTERMEDIATE

UPDATE SCHEDULE:

Each Saturday morning by 11:00 AM EST

REPORTING DELAYS:

Two weeks, so the most recent update will be at least two weeks old.

EXPLANATION:

Please see the discussion on the Public Short Ratio for more detailed information.

The constantly changing dynamics of the U.S. equities marketplace makes it difficult to compare recent activity to activity that occurred 30, 10, even 5 years ago.  Therefore, for indicators that have been around for decades, and that are subject to these changing dynamics, we like to observe the ratios on a "de-trended" basis. 

De-trended simply means looking at the data in such a way as to cancel out whatever long-term trend may be in place.  In the case of this data, increased hedge fund activity is the main culprit for causing this indicator to show a long-term rise.  In an attempt to negate that secular change, we created a new ratio by taking a 4-week (one month) moving average of the ratio and subtracting it from a 26-week (six month) average.  This allows us to compare recent activity to historical readings on more of an apples-to-apples basis.

GUIDELINES:

The concept here is the same as the Public Short Ratio itself - when we see such heavy public shorting that the de-trended ratio goes more than a standard deviation above its average, then we should be on the lookout for a possible upside reversal.  Again, however, we would prefer to see a more extreme oversold reading if we are in a downtrend. 

STATS:

ADDITIONAL RESOURCES:

New York Stock Exchange (www.nyse.com)

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