Nasdaq ‘Shorting’ Eases Off Its High

The bears on Nasdaq stocks staged a slight retreat over the last month as the number of Nasdaq shares sold “short” eased 1.4% in the 30 days ended Jan. 12.

That was a smaller decline than the 3% drop in shorted stocks on the New York Stock Exchange in the same period.

In a short sale, a trader borrows stock from a brokerage and sells it, expecting the price to decline in the near term. If the bet is correct, the borrowed shares can be replaced with shares bought later at a lower price.

Short interest in all Nasdaq securities totaled 3.45 billion shares as of mid-January, compared with 3.5 billion shares in mid-December, Nasdaq said Wednesday.

The December figure was a record high. Traders had increasingly shorted Nasdaq stocks in the second half of 2000, profiting as the tech sector plummeted--and helping to fuel the decline.

The small decline in the mid-January short-interest total could be bullish, some analysts say. Given Nasdaq’s rally so far this year, short sellers may be facing increasing pressure to close out their bearish bets by repurchasing stock in the open market. That could help power the market higher.