Righty,
Why are you comparing short interest to the avg. daily volume? The amount of short volume indicated in that chart is basically saying there is hardly any short interest.
For instance, you have the following:
Oct 15, 2007 Short interest= 26,349 avg. daily volume = 482,434
This represents a very unlikely short interest effect on SP. It is not saying, as you wrote, "overall the trend was showing a major portion of the daily avg volume was being shorted, so much so that now they are shorting more than the daily avg volume.".
Doesn't it show the EXACT opposite? That on any given day, the average short interest is small based on the average number of shares being traded daily. And besides how can you use the avg. volume to make this correlation since you are using the short interest for a "particular day"? Do you see what I'm saying? Or have I misunderstood you in some way?
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