OK as you know the official numbers are in: the nett reduction...

OK as you know the official numbers are in: the nett reduction in shorts last Friday was 13.87M- from 4.6% to 3.72% in a single day! A vertical drop! The good news for me is that my guess of 15M was the closest guess, so congratulations to me. It helps that I was the only one to actually have a guess, but I was pretty close don’t you reckon?

Actually it is very, very good news for all of us, and confirms to me that MYX is still the lowest risk buy in my portfolio- even at current levels. Why? Well if you add the new daily shorts from Friday at approx. 1.4M, then the total buying volume from shorts covering was about 15.27M of the total combined volume traded of 75M. This means that there was about 60M of buying that was NOT shorts covering- it was new buying- and still leaving 58.3M of shorts to cover- basically a backlog of buying support as price continues to climb.

So here’s why I was interested- it adds weight to a theory I’ve been toying with that perhaps there are now some bigger, uglier, meaner smart money buyers in town. I mean, we mostly know who the big sellers were last Friday- mostly frustrated long term holders (stale holders/weak hands), but also some profit takers from more recent buying and probably some day traders attracted by the recent action. But which buyers were responsible for the massive gap up on open? I mean, the results weren’t that good/unexpected were they? Was it just “the market” and normal, or perhaps it was something more, some additional price “encouragement” to amplify the opening action?

Say you were a market maker with a huge buy order for MYX, then you would probably want to remove the shorters as the most obvious buying competition at the moment so you could go about accumulating without forcing the price up too fast. So a huge gap up, massive volume of shorters stops hit, and bingo we have a massive stop hunt/ shorter shakeout on our hands. At the same time the explosive action has shaken out millions from frustrated stale holders (which was pretty predictable), clearing some of the way for price to pass through this zone more freely when the time comes. After the initial burst, it settled down and most of the days trading (over 2/3) was actually done between 1.065 and 1.14.

Just a theory, but there’s been a bit of commentary lately about the big money pulling their money “back into the centre of the wheel”, away from riskier emerging markets etc and looking for investing opportunities within more traditional markets and exchanges. So it’s not unreasonable to think MYX fits the bill for this type of investment. Anyway, if this is the case it’s also good news for us, as we’ll probably need the smart money help at some stage to effectively clear the path for longer term gains.