Monitoring Short Interest

With all major stock market indices continuing to grind their way higher and shrugging off investors' concerns, I am keeping my eyes on two particular data sets. This is in addition to the regular flow of economic, demographic and psychographic data and the company and industry news that I watch each week. I shared one of those figures at the American Association of Individual Investor sentiment late Sunday night. Currently, that figure has not reached the sky-high levels that coincided with prior tumbles in the market, but it is worth watching.

The other is short interest. For those unfamiliar with the term, this refers to the quantity of stock shares that investors have sold short but not yet covered or closed out. Much like the AAII data stream I mentioned above, short interest is also a gauge of sentiment as to whether or not investors think a stock will fall -- the higher the short interest, the greater the expectation for a fall. There are times when high short interest causes investors some pain. For example, a short squeeze in a stock happens when investors are forced to purchase shares in situations where the price increases rapidly in order to exit their short positions....409 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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