Bulls are pretty crowded now

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Short Sales on S&P 500 Reach Three-Month Low, Led by Technology

May 27 (Bloomberg) -- Bets against stocks in the Standard & Poor’s 500 Index fell to the lowest level since Feb. 27 as investors reduced short sales on technology companies including Microsoft Corp. and Cisco Systems Inc.

The number of S&P 500 shares sold short dropped 1.7 percent to 9.87 billion shares on May 15 from 10 billion on April 30, according to exchange data compiled by Bloomberg. Technology had the biggest decline among 10 industries, with short interest falling 6.3 percent to 1.49 billion shares. Banks and other financial institutions experienced a 3.2 percent decrease to 3.37 billion shares.

Investors turned more bullish after the S&P 500 completed the steepest nine-week rally since the 1930s, surging 37 percent through May 8. Regulators have also cracked down on short selling, or the sale of borrowed stock in the hope of buying it back at lower prices, after chief executive officers including Morgan Stanley’s John Mack blamed the trading strategy for worsening the market’s slump.

“Stocks have all acted a lot better,” said Bill Frels, the St. Paul, Minnesota-based chief executive officer of Mairs & Power Inc., which manages about $3.5 billion. “The perceived risks in the industry have diminished considerably.”

Since the S&P 500 sank to the lowest level in 12 years on March 9, technology shares in the index have jumped 35 percent while financial stocks added 86 percent.

Edward Lampert

Shares sold short for Redmond, Washington-based Microsoft, the world’s largest software maker, fell 29 percent to 56.5 million shares. At Cisco, the biggest producer of computer- networking equipment, the figure decreased 26 percent to 50.9 million shares. Cisco is based in San Jose, California.

As a proportion of shares available for trading, or float, short interest for the S&P 500 slumped to 5 percent as of May 15. It’s fallen from 5.6 percent on March 13 and 5.9 percent on July 15.

Short interest in Sears Holdings Corp., the Hoffman Estates, Illinois-based department-store chain, dropped by more than half to 11.7 percent of float. The proportion also fell in half at AutoZone Inc., the auto-parts retailer whose headquarters is in Memphis, Tennessee.

Hedge-fund manager Edward Lampert is the chairman of Sears and the largest shareholder at AutoZone.

Traders boosted short sales on railroad operator CSX Corp., based in Jacksonville, Florida, to 5.6 percent of float from 1.48 percent.

ultimate

n748

good. Less to be squeezed.  Or money is available for more short at higher price.