With the markets giving back more than half of their November positive returns in the first week of December we are seeing short sellers reverse course and are now short selling into the recent market downturn after a month of short covering in November.

DATE

S&P 500

Nasdaq

Russell 3000

S&P/TSX

November Returns

5.38%

4.09%

5.02%

5.29%

December Returns

-3.58%

-4.19%

-3.72%

-2.35%

Short interest in the U.S.\Canada markets decreased by -$30.7 billion, or -3.2%, to $941 billion in the December of 2022. The $30.7 billion decrease was made up of $38.5 billion in shorted share price decreases partially offset by $7.8 billion of new short selling.

Short Interest by Sector: As of 12.8.22

Sector

11/30/22 Short Interest

12/7/22 Short Interest

Dec. Change Short Interest

Dec. Change Shares Shorted

Dec. Change Mark-to-Market

Communication Services

$67,181,764,336

$65,111,862,566

($2,069,901,770)

$519,875,701

($2,589,777,471)

Consumer Discretionary

$153,143,001,665

$147,511,443,681

($5,631,557,984)

$1,407,142,997

($7,038,700,981)

Consumer Staples

$44,402,828,624

$43,656,011,935

($746,816,689)

($88,924,010)

($657,892,679)

Energy

$77,450,093,486

$71,998,128,271

($5,451,965,215)

$465,790,261

($5,917,755,476)

Financials

$115,967,637,749

$111,648,308,808

($4,319,328,941)

$1,235,049,876

($5,554,378,817)

Health Care

$127,085,036,928

$126,668,412,460

($416,624,468)

$1,770,109,299

($2,186,733,767)

Industrials

$101,914,041,619

$98,928,212,218

($2,985,829,401)

$691,136,617

($3,676,966,018)

Information Technology

$179,368,872,927

$171,323,047,945

($8,045,824,982)

$1,111,424,333

($9,157,249,315)

Materials

$41,817,150,095

$41,554,155,123

($262,994,972)

($337,005,316)

$74,010,344

Misc. (SPACs)

$556,775,891

$521,532,742

($35,243,149)

($6,516,500)

($28,726,649)

Real Estate

$38,874,318,813

$38,430,176,790

($444,142,023)

$797,625,776

($1,241,767,799)

Utilities

$24,131,134,548

$23,826,516,544

($304,618,004)

$218,441,964

($523,059,968)

Total U.S.\Canada Short Interest

$971,892,656,681

$941,177,809,081

($30,714,847,600)

$7,784,150,997

($38,498,998,597)

Every sector had a decrease of short exposure in December with Information Technology (-$8.0 billion), Consumer Discretionary (-$5.6 billion) and Energy (-$5.5 billion) having the largest decreases of short interest in December.

In response to this sudden and dramatic downward move in the market, short sellers were most actively shorting Health Care (+1.8 billion), Consumer Discretionary (+$1.4 billion), Financials (+$1.2 billion and Information Technology (+1.1 billion).

This reverses a portion of the short covering we saw in November. The sectors with the largest amount of short covering in November were Healthcare (+$4.8 billion), Financials (+$4.5 billion) and Consumer Discretionary (+$3.5 billion).

Short Selling by Sector: Through November 2022

Sector

10/31/22 Short Interest

11/30/22 Short Interest

Nov. Change Short Interest

Nov. Change Shares Shorted

Nov. Change Mark-to-Market

Communication Services

$64,555,360,658

$67,181,764,336

$2,626,403,678

($1,031,747,484)

$3,658,151,162

Consumer Discretionary

$147,830,611,181

$153,143,001,665

$5,312,390,484

($3,459,741,097)

$8,772,131,581

Consumer Staples

$43,136,867,496

$44,402,828,624

$1,265,961,128

($1,169,384,616)

$2,435,345,744

Energy

$77,689,755,188

$77,450,093,486

($239,661,702)

($850,713,158)

$611,051,456

Financials

$114,608,678,519

$115,967,637,749

$1,358,959,230

($4,487,092,351)

$5,846,051,581

Health Care

$127,126,989,474

$127,085,036,928

($41,952,546)

($4,792,888,505)

$4,750,935,959

Industrials

$98,743,340,100

$101,914,041,619

$3,170,701,519

($2,711,245,125)

$5,881,946,644

Information Technology

$173,640,286,490

$179,368,872,927

$5,728,586,437

($1,011,133,423)

$6,739,719,860

Materials

$38,315,826,045

$41,817,150,095

$3,501,324,050

($352,289,039)

$3,853,613,089

Misc. (SPACs)

$531,258,234

$556,775,891

$25,517,657

$26,837,850

($1,320,193)

Real Estate

$37,254,346,443

$38,874,318,813

$1,619,972,370

($668,717,958)

$2,288,690,328

Utilities

$24,413,058,910

$24,131,134,548

($281,924,362)

($1,721,266,395)

$1,439,342,033

Total U.S.\Canada Short Interest

$947,846,378,739

$971,892,656,681

$24,046,277,942

($22,229,381,302)

$46,275,659,244

Short sellers are up $38.4 billion in December net-of-financing mark-to-market profits, up +4.02%. These profits cover four-fifths of the $47.4 billion of net-of-financing mark-to-market losses they incurred in November.

Sector

Dec. MTM PL

P\L %

Nov. MTM PL

P\L %

Communication Services

$2,579,719,531

3.90%

($3,780,609,504)

-5.74%

Consumer Discretionary

$7,023,502,599

4.67%

($8,490,031,724)

-5.64%

Consumer Staples

$651,680,961

1.48%

($2,373,477,764)

-5.42%

Energy

$5,893,417,742

7.89%

($930,316,134)

-1.20%

Financials

$5,433,443,765

4.77%

($5,632,078,050)

-4.89%

Health Care

$2,212,372,725

1.74%

($4,719,246,870)

-3.71%

Industrials

$3,647,826,372

3.63%

($5,743,761,867)

-5.72%

Information Technology

$8,557,120,923

4.88%

($7,618,887,646)

-4.32%

Materials

$696,557,943

1.67%

($4,678,404,091)

-11.68%

Misc. (SPACs)

$3,393,986

0.63%

($32,188,359)

-5.92%

Real Estate

$1,245,178,231

3.22%

($2,133,610,944)

-5.61%

Utilities

$492,712,200

2.05%

($1,314,655,780)

-5.42%

Total U.S.\Canada MTM P\L

$38,436,926,978

4.02%

($47,447,268,731)

-4.94%

Stocks with the largest net-of-financing mark-to-market profits in December were:

Name

Ticker

Avg Fee

Avg Short Interest

Dec. MTM P\L

P\L %

TESLA INC

TSLA US

0.30%

$14,377,954,949

$1,561,474,166

10.86%

APPLE INC

AAPL US

0.30%

$16,994,631,106

$822,658,063

4.84%

AMAZON.COM INC

AMZN US

0.30%

$7,712,841,956

$668,929,050

8.67%

BANK OF AMERICA

BAC US

0.30%

$2,599,628,712

$375,240,766

14.43%

VISA INC

V US

0.30%

$8,287,392,730

$345,382,259

4.17%

MICROSOFT CORP

MSFT US

0.30%

$8,059,055,838

$344,249,310

4.27%

MIRATI THERAPEUTICS

MRTX US

0.30%

$667,743,920

$321,546,479

48.15%

OCCIDENTAL PETRO

OXY US

0.30%

$3,869,000,687

$318,925,925

8.24%

ALPHABET INC - A

GOOGL US

0.30%

$5,206,869,544

$315,704,502

6.06%

ADVANCED MICRO DEVICES

AMD US

0.30%

$3,027,482,020

$300,204,142

9.92%

EXXON MOBIL CORP

XOM US

0.30%

$4,156,009,060

$293,771,988

7.07%

NVIDIA CORP

NVDA US

0.30%

$6,016,167,762

$290,835,939

4.83%

SALESFORCE.COM INC

CRM US

0.30%

$1,312,030,415

$272,185,983

20.75%

BLACKSTONE GRP LP

BX US

0.30%

$1,586,774,501

$259,813,268

16.37%

COSTCO WHOLESALE

COST US

0.30%

$2,139,740,216

$247,369,008

11.56%

AVIS BUDGET GROUP INC

CAR US

0.30%

$1,375,416,909

$217,215,355

15.79%

GAMESTOP CORP

GME US

8.07%

$1,402,566,361

$211,629,425

15.09%

ALPHABET INC - C

GOOG US

0.30%

$3,261,688,995

$205,379,740

6.30%

LUCID GROUP INC

LCID US

8.98%

$1,288,792,879

$201,348,062

15.62%

ENBRIDGE INC

ENB US

0.30%

$3,913,805,668

$195,539,501

5.00%

And the stocks with the largest percentage net-of-financing mark-to-market profits with over $250 million in short interest in December were:

Name

Ticker

Avg Fee

Avg Short Interest

Dec. MTM P\L

P\L %

CARVANA CO

CVNA US

5.82%

$269,028,715

$141,758,523

52.69%

MIRATI THERAPEUTICS

MRTX US

0.30%

$667,743,920

$321,546,479

48.15%

INTELLIA THERAPEUTICS INC

NTLA US

0.30%

$283,452,620

$85,520,148

30.17%

ASANA INC

ASAN US

0.57%

$268,449,879

$80,833,643

30.11%

APPLOVIN CORP

APP US

0.30%

$272,595,475

$73,408,166

26.93%

NRG ENERGY INC

NRG US

0.30%

$568,681,457

$133,863,757

23.54%

SWEETGREEN INC

SG US

0.82%

$263,803,202

$60,248,111

22.84%

COMSTOCK RESOURCES INC

CRK US

0.30%

$311,664,825

$70,024,328

22.47%

OLLIES BARGAIN OUTLET

OLLI US

0.30%

$507,758,653

$113,814,866

22.42%

BIOCRYST PHARMA

BCRX US

0.30%

$333,300,347

$71,822,155

21.55%

SALESFORCE.COM INC

CRM US

0.30%

$1,312,030,415

$272,185,983

20.75%

AFFIRM HLDGS INC

AFRM US

0.57%

$557,286,772

$105,144,053

18.87%

SL GREEN REALTY CORP

SLG US

0.30%

$354,109,265

$66,161,738

18.68%

PBF ENERGY INC

PBF US

0.30%

$310,374,587

$57,862,085

18.64%

SIGNATURE BK NY

SBNY US

0.30%

$299,143,173

$51,270,650

17.14%

VORNADO REALTY

VNO US

0.30%

$442,253,588

$74,389,085

16.82%

ZIM INTEGRATED SHIPPING SVCS LTD

ZIM US

6.07%

$268,979,717

$45,243,388

16.82%

NORDSTROM INC

JWN US

0.30%

$461,484,672

$76,022,776

16.47%

ELASTIC NV

ESTC US

0.30%

$290,550,590

$47,848,848

16.47%

BLACKSTONE GRP LP

BX US

0.30%

$1,586,774,501

$259,813,268

16.37%

The volatility in the market has forced short sellers to react quickly to momentum trends. Traders are looking to be more efficient on the short side to effectively offset stock price moves on the long side. Hedge funds are finding it frustrating to be hedged on a notional basis, but their resulting combined long and short P\L does not perform as expected. The result is short exposure rising and falling in different industries when momentum trends are identified.

The industries with the largest increase in shares shorted in November – December are:

Industry

10/31/22 Short Interest

12/7/22 Short Interest

Change Short Interest

Change Shares Shorted

Change Mark-to-Market

Semiconductors & Semiconductor Equipment

$39,675,470,427

$47,045,505,396

$7,370,034,969

$2,642,632,675

$4,727,402,294

Technology Hardware Storage & Peripherals

$20,766,738,259

$21,689,984,161

$923,245,902

$2,164,785,491

($1,241,539,589)

Specialty Retail

$30,221,060,873

$32,205,439,445

$1,984,378,572

$770,143,599

$1,214,234,973

Interactive Media & Services

$17,457,266,512

$19,188,811,603

$1,731,545,091

$675,761,806

$1,055,783,285

Chemicals

$13,947,454,475

$14,829,383,740

$881,929,265

$630,185,604

$251,743,661

Equity Real Estate Investment Trusts (REITs)

$32,917,969,476

$34,067,839,814

$1,149,870,338

$484,037,935

$665,832,403

Multiline Retail

$7,224,820,936

$7,313,760,462

$88,939,526

$448,303,686

($359,364,160)

Road & Rail

$14,632,030,040

$14,902,623,881

$270,593,841

$254,798,952

$15,794,889

Automobiles

$28,614,814,807

$24,237,395,935

($4,377,418,872)

$174,188,309

($4,551,607,181)

Food Products

$12,350,633,252

$12,672,718,455

$322,085,203

$128,030,964

$194,054,239

The industries with the largest increase in shares covered in November – December are:

Industry

10/31/22 Short Interest

12/7/22 Short Interest

Change Short Interest

Change Shares Shorted

Change Mark-to-Market

Software

$57,706,528,867

$49,673,872,096

($8,032,656,771)

($3,940,887,197)

($4,091,769,574)

Banks

$49,919,643,579

$47,054,832,909

($2,864,810,670)

($2,285,713,382)

($579,097,288)

Biotechnology

$43,749,279,076

$42,834,801,614

($914,477,462)

($1,677,736,298)

$763,258,836

Electric Utilities

$12,765,124,867

$12,366,142,750

($398,982,117)

($1,047,931,543)

$648,949,426

Metals & Mining

$17,920,750,753

$20,194,477,893

$2,273,727,140

($994,290,971)

$3,268,018,111

Internet & Direct Marketing Retail

$24,054,718,412

$25,885,401,942

$1,830,683,530

($953,055,058)

$2,783,738,588

Hotels Restaurants & Leisure

$27,761,554,488

$27,707,188,020

($54,366,468)

($729,182,019)

$674,815,551

Food & Staples Retailing

$11,457,802,249

$11,058,215,655

($399,586,594)

($691,851,025)

$292,264,431

Entertainment

$18,362,332,360

$17,595,130,404

($767,201,956)

($686,330,687)

($80,871,269)

Household Durables

$8,264,661,103

$8,150,557,549

($114,103,554)

($621,073,661)

$506,970,107

The following are the biggest stock movers in the industries with the most short selling short in November-December:

Industry

Ticker

Short Selling ($ millions)

Semiconductor & Semiconductor Equipment

NVDA US

$ 718

AMD US

$ 689

AVGO US

$ 491

KLAC US

$ 470

Tech Hardware Storage & Peripherals

AAPL US

$ 1,971

HPQ US

$ 199

WDC US

$ 52

Specialty Retail

HD US

$ 664

KMX US

$ 255

FND US

$ 177

LOW US

$ 173

The following are the biggest stock movers in the industries the with most short covering in November-December:

Industry

Ticker

Short Covering ($ millions)

Software

MSFT US

$ (1,109)

U US

$ (335)

PANW US

$ (306)

INTU US

$ (276)

WDAY US

$ (230)

Banks

RY US

$ (926)

BMO US

$ (434)

BNS US

$ (386)

BAC US

$ (229)

PNC US

$ (262)

Biotechnology

MRNA US

$ (278)

AMGN US

$ (190)

ASND US

$ (185)

BMRN US

$ (149)

ALNY US

$ (140)

ABBV US

$ (134)

Electric Utilities

ETR US

$ (450)

PCG US

$ (408)

SO US

$ (132)

NEE US

$ (95)

If market weakness continues, we should see continued short selling across all sectors and follow the trend that we identified in the first week of December. But if the market whipsaws once again and the Santa Claus rally does appear, we will probably see much of this recent short selling reversed with short covering and the November trend of market wide short covering return.

Shorts Reverse Direction

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