SHORT INTEREST - NYSE (DE-TRENDED)

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APPLICABLE TIME FRAME(S):  

LONG

 

UPDATE SCHEDULE:

Data is released monthly, around the 20th of the month.  The data is updated here by 7:00 PM EST the evening the data is released.

 

REPORTING DELAYS:

Several days, covering the activity over the prior month.

 

EXPLANATION:

Please see the discussion on the Short Interest Ratio for more detailed information on short interest.

 

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 short interest, 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 the modified short interest ratio and subtracting it from its 5-year average. 

 

This allows us to compare recent activity to historical readings on more of an apples-to-apples basis.

 

GUIDELINES:

The interpretation of this indicator is the same as short interest itself.  When short interest rises so much as to become stretched above its 3-year average, then we have seen a large buildup of short interest, and we may want to consider the possibility of a long-term uptrend in prices. 

 

Conversely, when the modified ratio slips below its 5-year mean to a large degree, then short interest has dried up and the market will be without a short-covering base that would sustain higher prices.

STATS:

  Since 1950 Since 1993
Mean 0.2 0.3
St. Dev.* 0.7 1.2
Maximum 2.4 2.3
Minimum -1.8 -1.8

 

*Standard Deviation.  See below...

 

68% of readings (1 standard deviation) should be between -0.5 and 0.9

95% of readings (2 standard deviations) should be between -1.2 and 1.6

99% of readings (3 standard deviations) should be between -1.9 and 2.3

 

In other words, we should expect a reading under -1.2 or over 1.6 approximately 13 times per year.  Since such a reading would be relatively unusual, it suggests that we may be seeing an unsustainable trend.  These figures assume a normal distribution curve.

 

ADDITIONAL RESOURCES:

New York Stock Exchange (www.nyse.com)

 


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