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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: art slott who wrote (52426)	5/27/2000 11:03:00 PM
From: John Madarasz	Read Replies (1) \| Respond to of 99985

art...very good point and one that is probably not considered much... until now<g> Total Nasdaq short interest is on the rise, however it still is at what is considered bearish levels hinting the bottom is still not in... NASDAQ Short Interest Ratio At Market Low Bear Market Low 1990 2.9% Bear Market Low 1994 3.2 July 1996 correction 3.1 April 1997 correction 3.0 October 1997 correction 2.8 October 1998 correction 2.8 *NOW 1.5 edit(as of the latest release 5/15/00 the total short interest has risen to over 1.6...) The current short interest ratio does not indicate fear at all. It is much lower than at any of the previous NASDAQ market lows of the past 10 years. We keep hearing the bulls pointing to oversold indicators as points of comfort in assessing the potential depths of the current downturn. From our perspective, overbought readings have meant nothing for years on the upside. Shouldn't oversold readings mean nothing if we are truly on the brink of a secular bear market? The shorts have been driven from the NASDAQ. The close to 100% move in the NASDAQ from October of 1999 to the top this year clearly forced the shorts to evacuate in the upward tempest. The short interest ratio indicates confidence, complacency, and belief in the NASDAQ stalwarts. For what it is worth, the quantitatively oriented folks at Ned Davis Research have calculated that since 1990, a short interest ratio for the NASDAQ at a level below 1.7% has historically produced a subsequent negative level of annualized NASDAQ return. Lastly, in years gone by, the short community has been a source of demand for stocks in falling markets. Covering shorts at lower levels was not only every short seller's dream, but also clearly provided demand support to stock prices. Given that the short community has been decimated over this decade, it just may be different this time. Message 13759292 Regards, John M