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Data Doesn’t Show a Short Rally, Analyst Says

A January rally in December laggards might seem to be caused by short covering, but one research analyst said Monday that the data shows otherwise.

“We hate to rain on the parade on that particular theory, and there may be a tiny bit of truth in it — intraday covering or something — but whatever way we cut the data, we can’t find much evidence of sort of major short covering,” William Duff Gordon of Data Explorers told “Fast Money.” “And in fact, it points to actually shorts holding steady or actually slightly increasing in those stocks that have rebounded the most in January so far.”

The average short interest across the market was up just 0.1 percent, according to Data Explorers.

In stocks that have surged year to date, such as KB Home (up 40 percent), Dendreon (up 86 percent) and Mako Surgical(up 45 percent), short interest is up just 2 to 3 percent. Short interest was flat in Sears, up 39 percent year to date.

“Short sellers aren’t panicking. They’re not running for the door,” Gordon said. “Maybe they think it’s an overly optimistic January and things might get more miserable as the year goes on.”

Dan Nathan of FGC Securities disagreed with Gordon’s data assessment.

“At the end of the day, when you look at some of these stocks like First Solar and Netflix, when these things are rallying the way they are, up 20, 30, 40 percent in a very short period of time, there is no doubt about it, this is caused by shorts climbing over each other to cover when there is the least bit of good news,” he said.




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Trader disclosure: On Jan. 30, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Terranova owns AXP; Terranova owns F; Terranova owns APC; Terranova owns WFM; Terranova owns OXY; Terranova owns XOM; Terranova owns TRLG; Terranova owns SBUX; Terranova owns JNPR; Terranova owns VRTS; Terranova owns IBM; Terranova owns LQD; Terranova owns SU; Terranova owns SJM; Terranova owns BRCM; Terranova owns MUB; Terranova owns EMC; Terranova owns CSCO; Terranova owns V; Adami owns C; Adami owns GS; Adami owns INTC; Adami owns AGU; Adami owns MSFT; Nations is long BAC; Nations is long C; Nations is long SPY;

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