Dana Cole

Still Too Early to Celebrate Dow and S&P 500 Rise

I'm skeptical of short interest figures, since after the suspension of the uptick rule, it must be incredibly easy for quant traders to do short day trades, that is, to naked sell something that's going down at the open and then pick it up again for less at the end of the day. Would such short trades show up in the short interest figures?
I don't know, and I'm not sufficiently interested to do the research. Even if they were recorded, however, with approximately 25 steep down days (by range) since the all-time high in the S&P, that kind of short trading would have generated a lot of cash by now.
On the other hand, with each 5% move down in the indexes shorting becomes more risky. Why? Because the "smart" (read "big") money is going to jump in at the best prices, which will bring about the mother of all short squeezes.
Many good stocks are now approaching their 10-year lows and are attractive for their dividends alone, some of which are offering higher yields than almost any other investment. Smart institutional traders are not going to miss the opportunity to get into high yielding stocks at low prices, are they? They've got to put their money somewhere. What else are they going to do with it?
Gold is great as a hedge, but where are the dividends? Commodities have got to go up or you're not making money.
I hope that you're wrong in your estimation of where we're headed, although the prospect of buying stocks at even lower prices is certainly appealing.
Thanks for listening.