Summary:
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US indices remain well supported near 3-week highs
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Bank of America publish list of most shorted US stocks
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Most come from discretionary and tech sectors
Once more US indices are trading in the green this afternoon with the US500 moving up to its highest level in 3 weeks and probing the potential resistance zone from 2589-2624. After Friday’s strong gains the recent sessions have been a bit more measured, but they have still been gains nonetheless with the market on course for a 4th consecutive green close.
The small-cap US index (US2000) is often overlooks but can serve as a leading indicator as we saw during the downturn in the latter parts of 2018. The market peaked back at the start of September, almost a whole month before it’s large cap equivalents and also has fallen further, with a peak to trough decline of around 28%. Price has enjoyed a nice bounce of late and is now back around the 38.2-41.4% fib retracement region from 1441-1457 and this may put a cap on the rally for the time being. The break above the 23.6% at 1369 triggered a nice break higher and this could be seen as possible support if the market pulls back.
The US2000 has recovered to trade back near the 38.2-41.4% fib of the larger decline at 1441-1457. This may provide resistance going forward. Source: xStation
The positioning of managed money can often provide insight for a retail trader into how professionals see the current market. It can be seen as indicative of the likely path of least resistance for stocks, whether that is in the same direction as the imbalance or whether it is used as a contrarian indicator - heavily shorted stocks can have a propensity to rally sharply if sentiment changes and crowded downside bets are forced to run for the exits. Bank of America Merrill Lynch has issued a list of stocks that the markets are currently betting against the most, with the following 12 stocks listed in ascending order of their short interest as a percentage of float.
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TRIPADVISOR (TRIP.US) - Short interest 13%. 12-month performance: +64%
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CAMPBELL SOUP (CPB.US) - Short interest 13%. 12-month performance: -30%
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ALBEMARLE (ALB.US) - Short interest 13%. 12-month performance: -44%
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ADVANCED MICRO DEVICES MD (AMD.US) - Short interest 13%. 12-month performance: +68%
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COTY (COTY.US) - Short interest: 14%. 12-month performance: -63%
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MACYS (M.US) - Short interest: 14%. 12-month performance: +26%
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NORDSTROM (JWN.US) - Short interest: 15%. 12-month performance: +1%
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KOHLS (KSS.US) - Short interest: 15%. 12-month performance: +21%
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MICROCHIP TECHNOLOGY (MCHP.US) - Short interest: 16%. 12-month performance; -22%
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UNDER ARMOUR (UA.US) - Short interest: 17%. 12-month performance: +18%
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DISCOVERY COMMUNICATIONS (DISCA.US) - Short interest: 18%. 12-month performance: +22%
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MATTEL (MAT.US) - Short interest: 20%. 12-month performance: -26%
