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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 690.27

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Dec 26 4:00 PM EST

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To: JOHN W. who wrote (80909)	7/27/2001 12:02:50 AM
From: t2	Read Replies (2) of 99985

More information on Nasdaq Short Interest for July. Overall, I believe short interest increased 4.7%. However, the gains among the larger cap stocks seems be a bit more. Here is a list by market cap. Percentage Increase In Shorts 1. MSFT 1.6 2. INTC 11.1 3. CSCO 7.5 4. ORCL 21.8 5. Dell 25.0 It is just an indication that the traders are shorting the larger cap, higher dollar stocks. The dollars committed to shorting MSFT would be 6 to 7 times that of NTAP for example because of the price difference. One would expect traders to cover on stocks under $10 and look for bigger prey for purely psychological reasons. The odd thing is that mutual funds that are bottom fishing will prefer to buy the largest companies with proven track records first. That creates an interesting (possibly explosive) tug of war. The larger market cap stocks tend to have higher prices; so many in the Nasdaq are in single digits. That is another reason why I believe that although Nasdaq short interest increased 4.7%, it is understating the change in dollars committed to shorting. There is little doubt that the high shorting level is partly responsible for preventing this Nasdaq from retesting April lows as the technicals seem to suggest. Few were expecting a bounce or summer rally. Looks like there was enough skepticism even though it was not totally reflected in the usual contrarian indicators. As I have been saying, March was a special situation that creating an urgent selling frenzy and extreme indicators. We should continue higher on the Nasdaq as it appears we have finally started the summer rally.

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