Just Before Wed Sell-Off, Investors Intelligence Bulls Rose To 8-Week High – N/T Notwithstanding, Sentiment Remains Effusive L/T

The other thing is that shorts were not very aggressive leading up to this selloff. Mid-Oct, short interest on SPY (SPDR S&P 500 ETF) rose 3.9 percent period-over-period to a one-and-a-half-month high, while IWM’s (iShares Russell 2000 ETF) dropped 7.5 percent to a one-month low (Chart 3).

That said, it is worth pointing out that short-interest data come out twice a month. The latest data is as of nine sessions ago, so is outdated come to think of it. At the time, SPY was still above its 50-day, which was only breached on Monday (this week); IWM’s was not lost until Wednesday. So, it is entirely possible that SPY shorts got aggressive after the average was breached this week, which will only be captured in the current report.

If past is prelude, as short interest gets accumulated, it can act as a tailwind after selling ends and as shorts cover. At least as of mid-Oct, shorts have not been overly aggressive.

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Disclaimer: This article is not intended to be, nor shall it be construed as, investment advice. Neither the information nor any opinion expressed here constitutes an offer to buy or sell any ...

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