NYSE Short Interest Back Near Record Highs
Last night after the close, short interest figures for the New York Stock Exchange (NYSE) were released and showed that short sales as of May 15th rose 2.34% since the end of April. Even though the S&P 500 closed at its highest level since January, short bets remain near all-time highs. This is in contrast to October when short interest was declining leading up to the market's peak, and indicates that many investors are skeptical of the current rally.
The table below lists the twenty non-Nasdaq stocks in the S&P 500 (Nasdaq short interest figures will be released on May 27th.) with the highest short interest as a percentage of float. Like last month, Consumer Discretionary and Financial stocks are well represented on the list of stocks most heavily shorted. The list of stocks on the list of least shorted come from various sectors. In fact, eight of the ten sectors are represented on this list (no Materials or Consumer Discretionary).
Financials Back to Oversold
After briefly moving into overbought territory earlier in the month, the S&P 500 Financial sector has moved to the bottom of its trading range once again. The short-term uptrend that formed off the March lows has also been broken, so the sector is now trending sideways until it takes out its recent highs or lows. Breadth has also gotten weak again. On May 1st, 85% of Financial stocks in the S&P 500 were trading above their 50-day moving averages. Currently, just a third of the stocks are above their 50-days. Hopefully the sector begins to stabilize at current levels and doesn't get back to the extreme oversold levels constantly seen over the past 9 months.
S&P 1500 Earnings Revisions
With the S&P 1500 poised to open lower this morning, the index will be trading down about 3% from its recent highs. When the week started, the market was trading at its highest levels since January, and things seemed good. Four days later, the mood has shifted 180 degrees. Suddenly, oil is going to $200 (Hey, Goldman Sachs said so), Lehman and the rest of the brokers are in trouble again (at least according to an investor who is short the stock), and Ford no longer expects to turn a profit in '09 (With the stock at $7 and change, did anyone really think Ford was close to turning a profit?).
While the news has been bleak, one positive trend that remains in place is analyst forecasts. We track the net number of analyst EPS revisions (positive revisions minus negative revisions) for stocks in the S&P 1500 on a daily basis. While revisions have been negative all year, since bottoming in January they have been consistently improving and currently stand at their highest levels of the year. Even during this week's sell-off, analyst revisions haven't budged. Admittedly, analysts have built a reputation of notoriously being late to the game in terms of lowering forecasts, but for now at least the individuals who supposedly follow these companies the closest are sticking by their forecasts.
Credit Crisis Indicators
In late March, we highlighted charts of a few credit crisis indicators. Below we have updated those charts, and by the looks of them, things remain much better than they did a couple of months ago.
The first chart measures default risk by looking at a credit default swap index of investment grade debt. While the index has ticked slightly higher this week as equity markets have sold off, the rise has been puny compared to the spikes seen earlier this year. The second chart looks at the national average of 30-year fixed mortgage rates. While it would be nice if rates were lower, they have remained stable and are not spiking like they were in January and February when banks demanded huge spreads to take on any risk whatsoever. The last chart tracks the municipal bond market through the MUB ETF of S&P's National Municipal Bond Index. Another problem during the credit crisis was the failure of Auction Rate Securities, which tanked muni bonds and sent their yields sharply higher. As shown by the price chart, muni bonds have come back nicely as investors became attracted to those high yields.
