Sun Tzu,
Thought it might be better to respond on this thread....
Generally, I would agree, but the point I was trying to express was whether the short positions, collectively, might be a leading indicator of major market moves. If one could compare the ratio of total shares shorted over outstanding shares (perhaps weighted) would this be a leading indicator or do short positions generally following the overall market trend. Based on a very small sampling, I'm going to guess that on a given day the overall short interest is on the order of about 1-2% of outstanding shares. Hypothetically, if this percentage increases to 2.5% would this be a forward looking negative indicator. Alternatively, historically, if the the largest short interest ratio (as described above) were ...say 3% and the current short interest ratio was 2.9%, would this be an indicator of an ending bearish trend.
One point you made earlier that I'm not sure I would ascribe to is the point on whether short sellers consider fundamentals and to what degree. It seems rather that they are rather looking for a break in a upward trend. The trend may or may not be supportable with fundamentals: AMZN (15% short interest) or WCII (25%) are cases in point where it is "difficult" to justify the share price based on fundamentals. Whereas, TDFX (20%) and THQI (13%) seem to have rather strong fundamentals. Sidebar: It may be interesting to note that there is a 15% short position in AMZN and additional shares are not available for shorting, yet WCII and TDFX both have substantially more shares shorted. Something is going on here, I'm not sure what.....???
Best Regards,
Jim |
