Fundamental flaw in this article- short selling is increasingly expensive for retail customers- huge disincentive as today's bogus price action on PLMO, RIMM and canaries shows... But puts on high tick days IMTO
STOCKS are likely to rebound, at least for a while, if one obscure indicator, reflecting the investment patterns of an important Wall Street constituency, proves as accurate a forecasting tool as it has for the last 60 years.
The buy signal comes from the eight-week moving average of the weekly New York Stock Exchange specialist short-sale ratio. The ratio fell on July 23 to its lowest level, 22 percent, since at least 1943, when reliable records of the indicator were first compiled. That means specialist firms - brokers appointed by the exchange to maintain orderly markets in individual stocks, often by buying and selling shares themselves - accounted for about 22 percent of all N.Y.S.E shares sold short in the eight weeks through July 23. Selling short is a way to bet on declining prices, and the lower the ratio, the less short-selling the specialists are doing compared with other investors.
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