Short squeeze

In Uncategorized on August 25, 2009 at 10:06 PM

I learned what a short squeeze was today after reporting on the New York Stock Exchange’s  most recent release of short interest data. On Tuesday, the NYSE said short interest shares rose in the first-half of August as stocks increased. Typically, shorting a stock means investors think stocks will fall. The data demonstrates that there is still a sizeable chunk of investors that are betting against the market. However, the But the rise in short interest of about 42 billion was way below the March high topping 60 billion. On March 9, the S$P 500 fell to its lowest leve in six months: 667 points.

With that in mind, a short squeeze occurs when investors who have shorted stocks must pay back the market because they bet wrong. Because they pump money back into stocks, that increases share prices and the stocks rally, pushing the market toward further gains.

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