Short-Covering Driving Today’s US Stock Market Gains

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Short-Covering Driving Today’s US Stock Market Gains

By Bill Luby on March 10, 2009 | More Posts By Bill Luby | Author's Website

One of the best ways to determine how much short-covering is behind bear market rallies is to create a portfolio consisting of stocks and ETFs for which there is a large outstanding short interest.

With an eye toward sorting out short-covering activity in a future rally, I put together one such portfolio yesterday, using the Finviz.com screener to identify high volume securities where short positions are a large percentage of the float.

The results are below and show that the ten stocks in this portfolio are up an average of 11.8% halfway through today’s session, suggesting that short-covering is fueling a large portion of today’s rally. Note that 7 of the 10 holdings are up more than 11% today, led by Deutsche Bank (DB) and MGM Mirage (MGM).

[source: Finviz.com]

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