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Short Interest Intrigues


Am I throwing good money after bad or not?


NYSE short interest for the period between mid-June and mid-July declined 0.59%, the second decline in a row for this measure. NASDAQ short interest also declined (-1.51%), breaking five straight months of gains in NASDAQ short interest.

The graph I've been using appears below. It uses January 2003 as an index year (for no reason than that was a complete year bull market and the first year where I collected data. I'm not certain the graph is anything more than informational, but I think it is worth pointing out the pattern of the indexed NADSAQ Comp (in dark blue) after each time it was eclipsed by the indexed value of the NASDAQ short interest (light blue).

In contrast to short interest on the entire NASDAQ universe, short interest on the 161 stocks in the NASDAQ Biotech Index (NBI) (as of July 15) increased 1.45%. Short interest of the NBI as a percentage of overall NASDAQ short interest is now at 12%, the highest reading since October and November of 2004. The increases in short interest came in the face of an overall strong performance of the NBI.

Beginning in May, I started tracking short interest in biotechnology stocks that ended up on the Regulation SHO Category A and B lists. These stocks were selected because they were members of the NASDAQ Biotech Index (NBI) at the time the SHO Part Two rule was initiated. Short interest in these stocks increased in the last measurement period, corresponding to an overall increase in short interest in biotech.

Short interest in the IBB, the iShare ETF for the NASDAQ Biotech Index (NBI), declined 8.71% to 8.91M shares last month. In June, short interest in the IBB rose 7.62%. The BBH, a HOLDr ETF approximating the AMEX Biotech Index (BTK), saw short interest drop 1.12%, the fourth straight monthly drop.

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No positions in stocks mentioned.

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