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Short Sale Report Shows Shifting Bearish Sentiment
The trend in short sale interest indicates how the continuing rally in the market has impacted short bets, with the street possibility starting to give up on its bearish bets on the financial sector, and turning its attention to fairer game not protected by the Federal Government.
The report contained a few surprises in the data but also some expected changes. Total short interest was up 3.6%, indicating that many market players may feel that the market rally is due for a correction. The data was for the period ending May 29, 2009.
IN PICTURES: Eight Ways To Survive A Market Downturn
Bidding War
Data Domain, Inc (Nasdaq:DDUP) had the largest decrease in short interest on a percentage basis, down 65% from the report issued on May 15. This makes sense as short sellers had their heads handed to them twice on this one. NetApp (Nasdaq:NTAP) offered to buy Data Domain at $24 a share, which was about 25% above where it was trading at the time. Two weeks later. EMC (NYSE:EMC) offered $30 for Data Domain. This price was matched by NetApp shortly after. The stock is now trading at around $33 a share.
Satellite Radio
The biggest percentage increase came in the shares of Sirius XM Radio (Nasdaq:SIRI), which saw a 19% increase in short interest. It's hard to believe that short sellers are still pounding this one, as it was trading at 35 cents at the end of May, 2009, down from a peak price near $4 at the beginning of 2008.
Financials
Investors also double downed their bearish bet on E*TRADE Financial Corporation (Nasdaq:ETFC), with short interest up 24% from the middle of May. E*TRADE is another stock that has been decimated by the bear market, although it has rallied hard off of its bear market low of 59 cents reached in March, 2009. The stock now trades for just under $2 per share.
Perhaps the largest surprise was the absence of any other financials besides E*Trade in the top percentage gainers, which was rounded out by NVIDIA Corporation (Nasdaq:NVDA) and Yahoo! (Nasdaq:YHOO), up 17.5% and 10%, respectively. Does this mean the bear raid on financials is over? One would think that after the strong rally in financials the last two months, traders would start to short the group again, particularly if they feel that this is a bear market rally.
The Bottom Line
The short interest report from Nasdaq gives a picture of the changing bearish sentiment on Wall Street, as investors seem to have shifted away from a bear raid on the financial sector as they might have given up on battling the deep pocketed federal government. (Learn more about the short interest in our article, Short Interest: What It Tells Us.)
IN PICTURES: Eight Ways To Survive A Market Downturn
Bidding War
Data Domain, Inc (Nasdaq:DDUP) had the largest decrease in short interest on a percentage basis, down 65% from the report issued on May 15. This makes sense as short sellers had their heads handed to them twice on this one. NetApp (Nasdaq:NTAP) offered to buy Data Domain at $24 a share, which was about 25% above where it was trading at the time. Two weeks later. EMC (NYSE:EMC) offered $30 for Data Domain. This price was matched by NetApp shortly after. The stock is now trading at around $33 a share.
Satellite Radio
The biggest percentage increase came in the shares of Sirius XM Radio (Nasdaq:SIRI), which saw a 19% increase in short interest. It's hard to believe that short sellers are still pounding this one, as it was trading at 35 cents at the end of May, 2009, down from a peak price near $4 at the beginning of 2008.
Investors also double downed their bearish bet on E*TRADE Financial Corporation (Nasdaq:ETFC), with short interest up 24% from the middle of May. E*TRADE is another stock that has been decimated by the bear market, although it has rallied hard off of its bear market low of 59 cents reached in March, 2009. The stock now trades for just under $2 per share.
Perhaps the largest surprise was the absence of any other financials besides E*Trade in the top percentage gainers, which was rounded out by NVIDIA Corporation (Nasdaq:NVDA) and Yahoo! (Nasdaq:YHOO), up 17.5% and 10%, respectively. Does this mean the bear raid on financials is over? One would think that after the strong rally in financials the last two months, traders would start to short the group again, particularly if they feel that this is a bear market rally.
The Bottom Line
The short interest report from Nasdaq gives a picture of the changing bearish sentiment on Wall Street, as investors seem to have shifted away from a bear raid on the financial sector as they might have given up on battling the deep pocketed federal government. (Learn more about the short interest in our article, Short Interest: What It Tells Us.)
by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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