The short interest should decrease on the first big rally off the bottom. We've had several 50% rallies in the SOX during this bear market, and the shorts have been cut off at the knees on every one, and will be at the next as well.
To me, it's all numbers, just a complicated game of pattern recognition and balancing risks. Shorting has exactly the same emotional content as going long. Or at least it should, to a logical investor. During this entire bear market, I have never had a net short position. But, on the last three big rallies, I've steadily sold long positions, and balanced my remaining ones with short positions, and then waited for the rally to fail. I will continue doing this, as long as I judge we are in a bear market. I'm not betting on stocks going down; I'm reducing my market and sector risk, which is a very different strategy.
We may get a trough in margin at the bottom, on a disinterest bottom, (low volatility and low volume for months). The other way, is if we get a tidal wave of margin calls, on a day of market panic, with the Nas spiking 500 points down on massive volume. That would be interesting.
There were very, very few people who were smart enough to short this market at the top. I wasn't one of them. And there will be very, very few people with the courage and cash to buy heavily at the bottom. I'm trying very hard to be one of that select group, because those are the people who get rich and stay rich, investing in stocks. |
