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Like many longterm Sentiment and Supply/Demand indicators, Short Interest cannot be closely correlated to price action, but it is obvious that if a record amount of it exists, it will add fuel to a rise in prices, with so many tyro money managers/hedge funds tuned to the same channel and shorting the markets. A recent Barron's reported the Russell 2000 ETF (IWM) had 150% of its shares shorted; the Retail Spider (XRT) had 670%, homebuilders (XHB) 177%, and Real Estate (IYR) 133%.
Overall markets are reporting SI semi-monthly now, which is very high. Whether that was a major cause of Friday's huge up day, or option expiration, is debatable, but there was no followthrough today (Monday).
Almost all the CNBC and print pundits opine that we are at "A" bottom, and the wisdom at the weekend's excellent AAPTA/TSAA Conference was also mixed. As Editor of the TSAA Quarterly Review, I will be synopsizing and reproducing documents from that event in the upcoming newsletter shortly. The speakers as a whole gave historical, lively, and humorous talks that were both professional and actionable.
As expected, last week's Resistance-breaking rally caused Sentiment to regress from Bearish in many cases, including the McClellan Oscillator which ended at +53, recently a topping area; the IBD short interest was at a new record high; the Bullish per cent went on a SELL signal, although it is still in the lower area of the PNF chart. Completing the mixed picture is the bullish inversion of both the AAII and Inv.Intell. surveys on bullish/bearish positions, yet corporate insider selling screamed to the upside at 27:1!
Here are the numbers:
MktSentiment. 4/18/2008 Last Week..... .5Yr.HI...... LOW

DJIA ………. 12849……….12325………..14093............7286
Nasdaq………. 2402…………2290…………2810.............1114
S&P500…….. 1390…………1332…………1561………..776
CBOE Eq. put/call …74……………84……………..92-1/08…..........46-1/03

VIX ………. 20.1………….23.4…….…….44.. 9/02 bu........10.0-7/05 br
Intrade.com-
Recession% 60…………..72…………..76(bullish)….31(bearish)
McClellan Osc………53………….-6……………91-5/04 br......(-81)-5/04bu
McClelSum………-65……………-162…………..1568-6/03.......-917

Newsletter Surveys:
Inv.Intel -Bull:…..…37.8……….37.4……….…12/04br......35-6/06bu
Bear:………… 38.9………38.5………… 38.2-3/03.......16-6/03

AAII-Bull/Bear ……30.4/48.7…..45.8/37.3……..n/a n/a
MarketVane Bulls…46………….50…………. 74br..............24bu
IBD: Short Interest- 10.95nh…..10.5……………10.95………. 4.0
Public/NYSE Spec.-…12.2………12.9……….21bl…………..1.0br
Birinyi Blogger
Bull/Bear Poll ………48/28…….30/40
Bullish%- …………48sell…….48……….…88 -2/04br.....19bu
*Insider corporate sellers.27:1……7:1………..97…………..5
Sectors: Most Buyers: Consumer Services
Most Sellers: Energy

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