Our recent analysis of news sentiment on the Bloomberg Terminal and S3 short interest shows a strong negative correlation—bad news often leads to increased short positions. However, in some cases, short interest moves first, signaling that shorts may have an information edge. Understanding this relationship can help forecast future short positioning and market sentiment.

We used the Bloomberg news sentiment daily average and averaged for two weeks.

We then correlated that to short interest as a percent of float.

Some highly shorted names are news driven and some are not.

The correlation scores are negative meaning that bad news increases the short position.

Large news driven Short Positions

Large news driven Stocks

In the MRNA graph the news is Neutral and the short position is constant, and the news suddenly turns negative in the Summer, and the short position goes from 7% to 11%. SI in green, news in Red.

In this case the shorts lead the news at first. The shorting gets less when the news gets better.

Similarly, for SMCI which had very bad news.

For the large names many are shorted on bad news. However, the news magnitude is quite small as are the changes in the short interest. This is AMZN.

In many cases the short interest leads the news like SMCI. In other cases, the news leads the short interest like MRNA. In some cases, they move together.

The news, like the analysts sell recommendation is a sentiment indicator that we can use to understand the short interest better.

When the news leads, it can help forecast short interest. When the short interest leads the news, the shorts have information.

Want to know more?

Access this data in real time using S3’s BLACK APP or Contact us to get started.