ETF short interest provides some great insights into what the market really thinks.

I’m going to ignore Matt’s twitter-length rebuttal of my last post, and instead point to an excellent set of data that just appeared in my inbox. State Street Global Advisors publishes (as many firms do) a monthly report on the ETF industry. What grabbed me this time was the short-interest report.

It should come as no surprise that ETFs are heavily shorted. After all, one of the great things about ETFs is that phrase “exchange-traded.” It means you can fold, twist and mutilate an ETF just like you can any other stock, and that means that if you can find it to borrow, you can short it. And since many ETFs are phenomenally liquid, they can be pretty easy to locate for shorting.

Overall, short interest in ETFs as reported on Oct. 15 was 11.84 percent. This is substantially

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I concluded a post on stock markets over the weekend saying: “After equities’ seven-month climb, stock markets certainly look vulnerable for a decline. Two downside reversal days - on Wednesday and Friday - would seem to indicate that stocks could commence a pullback to work off the overbought condition, allowing fundamentals to reassert themselves.”

Global stock markets, as well as other risky assets, closed sharply lower over the past few days as concerns mounted over the sustainability of the global economic recovery and the outlook for central bank policy.

The performance of the major asset classes is summarized by the charts below, with the top one showing the period from the March 9 stock market lows until October 19 peak and the second one the subsequent period. The numbers indicate an all-change pattern in the performances as risk aversion re-entered financial markets and government bonds and the US

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This analysis is from John Derrick, U.S. Global Investors Director of Research. The market has rallied dramatically since the March 9 low, with the biggest beneficiary of this rally being low-quality companies. This intuitively makes sense, given that companies with the most troubled outlooks are the ones most likely to have a strong recovery when the dire outcomes predicted at the bottom of the crisis failed to transpire. Quality may have different meanings to different investors, but in a recent research piece, Citigroup ranked performance based on multiple definitions of quality. Samp;P earnings quality ranking, debt-to-capitalization ratio and return on equity were used as proxies for quality. The research universe was the small-cap Russell 2000 Index, but I believe broader market conclusions can be drawn as well. Based on Samp;P earnings quality rankings, companies with C or D (the two lowest categories) ratings returned about 55 percent over the past six months, while the ...

The CBOE publishes several options implied volatility indexes that can be helpful to stock investors who want to peek around the corner to the future through the eyes of options traders.

These two tables show the options implied (30-day future) volatility for several important indexes or index funds:

click image to enlarge

The “per year” column is the published annualized volatility (1 standard deviation). The columns for other periods (quarter, month, week and day) are math transforms of the annualized volatility to show the expected volatility for those periods of time.

Plus or minus one standard deviation is expected to encompass 67% of prices during the period.  Plus or minus two standard deviations is expected to encompass 95% of prices during the period.

Example:  The “per day” column says that the price of a GLD position is expected to

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Stocks moved lower for the third consecutive day on Friday, something that hasn’t happened in more than three weeks, as the bulls just couldn’t capitalize on a short-term overbought condition. Measures of selling pressure eased as the bears rested their knuckles after a two-day pummeling.

Investors are worried. The big question – as always – is whether the primary uptrend remains intact.

And the answer is yes.

To understand just what that target should be, let’s take a look at where we are right now.

Just before Wednesday’s sell-off, measures of the supply of stocks moved to new lows, while demand moved to new highs. This means bull-market-trading rules remain in effect. But as the cyclical bull market matures a little, we need to change the target of our buying efforts.

Although it looked like losses would be cut in the early afternoon, a lack of demand resulted in the major U.S. indices settling gently

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This article is adapted from the latest edition of U.S. Global Investorsrsquo; Weekly Investor Alert, published each Friday and distributed free to subscribers. Click here to view the entire Investor Alert. The stock market has been on a tear since bottoming out in early March 2009, with the strongest performance being seen in small-cap stocks. The Nasdaq, heavy with small-cap companies, was up 65 percent through last Fridayrsquo;s close from the March 9 low, while the large-cap-loaded Samp;P 500 Index and Dow Jones Industrial Average had gained 54 percent and 47 percent, respectively, over the same period. The two charts from RBC Capital Markets below drill down deeper into the inverse relationship between market cap and performance over the past six and a half months. Figure 1 ranks the performance by capitalization benchmark from the March low through the market close on September 23. Leading the way is the Russell Microcap Index (2,000 small-company ...

This article is adapted from the latest edition of U.S. Global Investorsrsquo; Weekly Investor Alert, published each Friday and distributed free to subscribers. Click here to view the entire Investor Alert. The stock market has been on a tear since bottoming out in early March 2009, with the strongest performance being seen in small-cap stocks. The Nasdaq, heavy with small-cap companies, was up 65 percent through last Fridayrsquo;s close from the March 9 low, while the large-cap-loaded Samp;P 500 Index and Dow Jones Industrial Average had gained 54 percent and 47 percent, respectively, over the same period. The two charts from RBC Capital Markets below drill down deeper into the inverse relationship between market cap and performance over the past six and a half months. Figure 1 ranks the performance by capitalization benchmark from the March low through the market close on September 23. Leading the way is the Russell Microcap Index (2,000 small-company ...

I recently had the opportunity to get to know Ian Wyatt from SmallCapInvestor.com, and his small-cap (and overall market) knowledge is outstanding! He’s written the below article just for Trader’s Blog readers, and per my request has made a special offer to those interested in learning more about small-cap stocks. Please feel free to comment with questions, opinions, and insight!

==================================================================== Conventional wisdom told investors that buying great companies at any price and holding them to eternity was the surefire way to growing a college or retirement fund. After all, during a secular bull market like that experienced from 1982 through 2000, when the Dow soared 1,409%, is was an indisputable strategy for almost guaranteed profits.

However, the days of “buy and hold” profits are now a distant, but fond memory. With the end of the century came the end of the 18-year secular bull market, the greatest

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Options traders provide one community of opinions worth considering when evaluating short-term prospects for stocks. While they as a group could be totally wrong, they differ importantly from analysts and academics, because they are risking their money on their opinions.

It is mathematically possible to extrapolate the probable range of future prices through a specified period using the implied volatility of the near-term, “at the money” options associated with particular securities.  We published the formula in a prior posting.

It is important to note that the probability ranges make no suggestion as to direction, just the level of variation from the market price either positively or negatively. Other information is needed to inform your opinion as to whether prices will move into the upper or lower section of the probability ranges.

Key US Stock Indexes:

The chart below computes the 68% and 95% probably price ranges (one and two standard deviations of

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Pocketing Nice Dividends with Hot Small-Caps Marc Lichtenfeld, Advisory  Panelist Saturday, August 15, 2009: Issue #1067

If you’ve unfamiliar with my prior columns, you might not know that I focus primarily in the small-cap space – both in my specialist areas of healthcare and biotech and other sectors, too.

Typically, small-cap stocks purchased for capital appreciation and big gains more so than they are sought for dividends income.

But I’m actually a big fan of dividends, and the stability of the income they bring as well.

So is there a way to keep an eye on growth and earn solid, steady income at the same time? Usually, the two don’t go hand-in-hand – especially not in the small-cap sector.

But that doesn’t mean to say that it’s impossible to grab the best of both worlds.

There is a way to load your

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