Yesterday was a bit of a shocker when you realize that NYSE short interest was coming out on basically record levels. Unfortunately not every sector could be covered, but we hit many of the highlights. The raw increases in some of these names are hard to understand when you see the market posting new high after new high. Short sellers usually have deep pockets and a longer time frame, but so far means has translated to more suffering for a longer period for them.
The most shocking outright was the increase seen in the short interest in DJIA components. Out of the 28 listed on teh NYSE, only 4 posted a lower short interest than April. Cramer gave his first two rounds of price targets on these, and he might get there on short covering alone when these sellers just can’t take the pain any more.
As people think that drug stocks and medical devices might offer some safety in 2008 and beyond, you will be surprised to see the increase in the short sellling in medical land. Ouch.
Many short sellers are fighting with Warren Buffett and Bill Gates by making financial bets that the two billionaire moguls got it wrong on buying the railroad stocks.
Energy was mixed in short interest in an area where at least the short sellers might have figured out that rising oil and gas prices might mean higher prices to the underlying stocks.
Short selling is up in brokerage firm stocks as well. Maybe the rising market and the private equity landgrab for investment banking fees is just a farce to the contrarians.
The short selling in banking stocks was at least mixed, so the sellers aren’t betting against everything.
As the homebuilder cycle is at bottom, close to bottoming, or at whatever point you want to call it…..the short selling is up betting on a further drop in housing, and on a day that the homebuilders rose.
Semiconductor short sellers just aren’t stopping, even if the sector has defied much of the logic so far. Chips, Dips, Chains, and …..short sellers!
Sorry we were unable to get to more of these groups and we’ll follow up with more data when the NASDAQ short selling data for May 2007 is out.
Jon C. Ogg
May 23, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.
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