Obscure Indicator Points to Possible Market Bounce

NYSE Members Report
(Thou shrs)	Week 10/10/2008	Prev. Week	Yr-Ago Week

Short Sales
Total	3,316,403	1,953,960	1,354,878
Public	2,678,361	1,523,476	895,228
Members	638,043	430,484	459,650
Specialists	122,264	108,206	107,698
Floor Traders	0	0	0
Other members	515,778	322,278	351,952
Spec/Public %	.0	.1	.1
Members/Public %	.2	.3	.5

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Above is a snippet from the NYSE Members Report from Barrons.com. What I want to direct your attention to is the Public short sales section for the most current week, 10/10 highlighted in blue.

It has ballooned up to over 2.6 mil compared with the number of specialists short to around 122k. Traditionally the public is always wrong at important turning points and I see no reason to argue that this time is different. With the Put/Call hitting extremes intraday and the Equity Put/Call doing the same it seems that everybody is standing on the same side of the boat.

The increase from the previous week is quite impressive and points to extreme bearishness. I’m sure if we had this past week's numbers, it would be even more skewed given the losses we experienced. Compare it to the previous year and this week had 3x as many short sales as last year at this time.

I track these figures in an spreadsheet and the last time the disparity between the public and specialists was this high occured in mid-July, which kicked off a 1000 point short-lived rally. Now, 1000 points doesn’t seem like a whole lot since we move that much in a day or two, but it’s a start and it could turn into something more.

Another point to keep in mind is that we didn’t have the precipitous sell-off leading up to mid-July either, so maybe we bounce more than the last time on a percentage basis.

Comments

[standfast77:]

For nine months Youse guys have been talking about a upturn starting with the Santa Clause rally, Easter Bunny rally, Tooth Fairy rally, and now you with the Felix the dead cat rally. Someday one of youse guys will be lucky and be proclaimed the all knowing, all powerful OZ.

Even Bozo the Clown would'nt go long here.

2008 Oct 26 08:49 AM

[User 86999:]

The week of 10/10 implies end of that week because 10th was a friday, so the data is a bit too old in today's fast moving circus, as 2 more weeks closed after that data. And we already know how brutal those two weeks were. Since the 'specialists' number was also on the rise that probably indicated what we saw in the two following weeks after that number was published.

2008 Oct 26 12:50 PM

[Jeff Pierce:]

standfast,
If you read my blog then you'll know that I haven't called any bottom during all this. I went long on the Friday before the huge 1000 point rally the following Monday, cashed out and sat on the sidelines until last week. Nibbled some on Wed and Fri and will see what this week brings.

Suggesting that it may be time to put some money to work is far from calling a "bottom" like the yahoos on CNBC do. I think Buffet would take offense from you calling him a bozo.

Making money in the market is about doing what the masses aren't to some extent, and everybody is so bearish right now that it may be time to consider the long side for a trade. Key word here is for a trade.

2008 Oct 26 03:11 PM

[investor88:]

Jeff you do have a respectable record and you do have good logic for nibbling. Would be interesting to see whether your optimisim about short term rally pans out.

2008 Oct 26 07:50 PM