Well, it looks like the good days in the stock market are over. At least in the near term. It feels like the day following christmas. You can remember the good times but you know they won't be back for another year.
This market starts to make many financiers frightened. So do not be surprised if you are feeling the same way. I encouraged folks to hedge their portfolios. Those who remained cautious thru the last few months are guffawing all of the way to the bank.
Is it going to get worse?
Back in March the market seemed to bottom out. Bear Stearns had collapsed and many thought the worst was over. I know i definitely hoped it was. Sadly, lots of investors seemed to change their mind.
Now I know what you are thinking. How do I know what other speculators are thinking?
I should tell you, but first give me a minute.
taking a look at the US economy we continue to have our justifiable share of Problems. The home market is in shambles. This has not helped US clients one bit. Consumer confidence numbers are at twenty year lows.
Toss on the uneasy fiscal industry and we have got a really big mess. Top that off with inflation in food and fuel. And we'll be cleaning this mess up for a long time.
I am starting to query thoughts of a year-end rally.
I believe we will have a few specific industries that'll continue doing well. Like farming, metals, mining, and technology. The remainder of the market's looking pretty ugly. Now I'm not alone in these thoughts. So how do I know other stockholders agree with me?
Here's the secret. Short interest.
Each of the major markets report short interest on a regular basis. It's simply the quantity of shares that are borrowed and sold by speculators. The hope is that stock prices will fall and they can buy back the shares they borrowed at a smaller price. That is what folks mean when they talk about'shorting a stock.'
you have heard the old proverb'Buy low and sell high?' Well, short selling turns that the other way up. With short selling you want to sell high. THEN. .buy
low.
lately the New York Stock Exchange ( NYSE ) released their short interest numbers. It's actually engaging data. It covers not only individual stocks but the market as a whole too. The most recent announcement was shocking.
To the numbers.
Short selling on the NYSE set a record for the first bit of June! As it now stands, investors have sold short more than 17.6 bln shares of stock. If that sounds like a lot, trust me, it is. What's more superb is the increase in the last two weeks. Short interest increased 7.4% from May thirty to June 13.
clearly plenty of speculators assume the market's heading south.
Now I don't normally short stocks. In my mind it is too dangerous. If a trade moves against you, massive losses can pile up in the blinking of an eye. Besides, in order to short stocks you want to have approval in your trading account. That implies more paperwork and hassle.
But I do keep a tight watch on this.
Knowing where the market stands with short interest can give a good glimpse of how backers are thinking. Finding short interest is simple. I am going to the different market internet sites and do a fast search on short interest. Not only do they give you a table of information but they also tell you another critical number'Days to Cover.'
for example I went to the Naz website. I looked up the short interest on Microsoft ( MSFT ). They showed short interest loans of 83 million shares and 1.4 days to cover. 'Days to cover' is merely a mathematical calculation. The quantity of shares sold short is divided by average trading volume. It's an easy way to trace if short interest is going up or down.
I like to look at short interest to determine if backers are bullish or bearish. It is also great to see how short interest has changed over a period. If you see the quantity of days to cover skyrocketing it's a great sign that more and more speculators assume the stock is stood to fall.
take a look at short interest. I'm sure you will find it useful to gauge what the crowd is thinking.
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