Thanks for that, yes I used to follow the short positions quite closely a few years back. It is interesting how they are used in the market.
The gross daily short positions only shows half the story, the other half is the short interest ('held' short positions), which has not been released yet (T+3).
They both need to be combined to better understand the story......and sometimes it is still hard to work it out.
Short positions can be used to 'attack' a stock price (for profit), they can be used to hedge a 'long' position, they can be used as part of a 'strategy' (pair trading for instance), and they can be used for price 'manipulation' usually for an accumulation.
So when there are many uses happening at the same time, understanding what is really going on can be difficult....or almost impossible.
In the end short positions are just selling or 'supply', and if you follow the price action (like a good wyckoffian), you will just see it as normal selling pressure.
So anyway, when shorts are being used for accumulation.......
The daily short positions are seen to be high or are increased, but the short interest (held shorts) remains low or is declining, a good case can be made that price is being pushed down for accumulation. What appears to happen is short stock is used to sell into the bid, absorb it and then push the price down, then the stock that has been shaken out at the lows is initially used to buy back the short positions (so they are neutral overall), and then any further stock that is present can be bought at the new lower price (accumulation). Sometimes this happens over an extended period. Price is kept low, or kept declining slowly over days using short position to push, or keep, it down, and those short positions are always bought back very quickly (same day or very soon after), thereby keeping the short interest quite low, but allowing a 'long' accumulation over time. Other times, price is pushed lower very quickly, the shorts are bought back at or near the lows, and by then the 'offer' has been reloaded, and then the entire offer can be bought back pretty quickly to where price was originally (what I call 'reverse accumulation').
I used to have a chart specifically to show this, but it was all manually entered data, and was far to time consuming to maintain. I would like to automate it some time, but my excel and access skills are just not up to doing that it just yet.....maybe one day......
