NASDAQ Short Interest Surprise, Down But Up

We just saw some mixed data from the NASDAQ over the short selling data for the February 26, 2010 settlement date.  NASDAQ released data after the close today noting that its short interest in 2,418 listed NASDAQ Global Market securities came to a total of 6,766,241,351 shares versus a level of 6,778,298,546 shares in 2,421 issues that was reported for the prior Feb. 12 settlement date.  We started looking through the data and there is actually a very mixed bag here rather than this being an outright win.

This is a drop of about 1.7% in the February short interest.  That sounds good on the surface, right?  No.  NASDAQ noted that this end-of-February short interest represents 3.32 days average daily NASDAQ Global Market share volume.  The problem is that trading volume has lightened up in the markets.  The slightly higher nominal short interest in mid-February was representative of 2.70 days for the prior reporting period.

Sometimes good news on the surface is not good news in the end.  At least not on a relative basis.

If you add in the NASDAQ Capital Markets, the move was the same:
The NASDAQ Capital Market totaled 241,089,052 shares at the end of the settlement date of February 26, 2010 compared with 241,358,546 shares in 493 securities for the previous reporting period. This represents 2.73 days average daily volume, compared with the previous reporting period’s figure of 2.62.

With all being the same direction, the total volume showed a mixed picture as well.  There was a smaller share count in the short interest, but the smaller short interest was a higher benchmark compared to average daily volume.  The short interest in all 2,912 NASDAQ securities was 7,007,330,403 shares as of Feb. 26 settlement compared with 2,914 issues and 7,019,657,092 shares at the end of the previous reporting period. That puts the total at 3.30 days average daily volume versus an average of 2.70 days for the previous reporting period.

This is one of those situations where less can be more or where more can be less.  It all goes back to the rhetorical question with no points of reference… “Is the market cheaper when the DJIA is at 10,000 or 9,500?” Start asking traders and investors that question with no reference and you will get far more answers than you thought possible.

JON C. OGG