Mutual Fund Outflows Surge As NYSE Short Interest Back To March 2009 Levels... Yet Stocks Refuse To Plunge. Why?

Tyler Durden's picture

ICI has reported the latest weekly mutual fund flow data and it is not pretty: the outflow from domestic equity mutual funds of $5.7 billion for the week ended September 30 is the largest since August 10, and is the 6th consecutive week of redemptions from mutual funds, bringing the total outflow YTD to $89 billion, following $98 billion in 2010. This is almost $200 billion in nearly consecutive weekly outflows from equity funds in the past two years, the bulk of which has gone into bond funds. Is there anyone who still thinks that retail has any interest in investing in stocks? But wait, there's more. According to the NYSE, short interest at the exchange soared to a whopping 15.7 billion shares as of September 15, an 828 million increase in one fortnight, and the biggest since the March 2009 lows. There is one difference: back then the S&P was 40% lower. Which means that the bear cavalry is positioned and waiting for a massive market flush... which keeps on not materializing.


Because these same mutual funds, despite having record low cash holdings, continue to refuse to sell their stock holdings and replenish cash. The only reason we can attribute to this is that slow money managers keep hoping Bernanke will pull something out of his sleeve and create another Hail Mary market rush into year end, saving quite a few P&Ls, not to mention careers. Alas, with stocks where they are it is increasingly looking like Operation Twist may be the only thing they will get for 2011 - Bernanke needs the S&P in triple digits to have a strong case for a $1-2 trillion LSAP. As such funds find themselves in no man's land, where they will be redeemed at the end of the year unless stocks soar for whatever reason, but will refuse to sell before they absolutely have to, which will be end of December, or whenever the Nash equilibrium fails.

So with less than three months left, every single day that does not result in a massive market move, brings stock ever closer to that proverbial flush which the noted shorts are so stubbornly waiting for. And with every passing day this equilibrium becomes more and more tenuous until one day the selling has to commence. Is it any wonder that hedge funds are now overwhelmingly bearish and also waiting alongside the bear cavalry to scoop up the firesale which should begin if Bernanke does nothing but sits on his gluteus maximus?

NYSE short interest:

Domestic Equity Mutual Fund flows:

Mutual Fund cash balance:

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Joe Shmoe's picture

Isn't this one an age old contrarian indicator?



Pladizow's picture

These late day rallies are a JOKE and the market is a FARCE!

ratso's picture

Oh right, THE SKY IS FALLING not just today.  The end of the world has been briefly postphoned.

Stoploss's picture

Yeah, the bear cavalry..


You're pretty much fucked..

clones2's picture

Just a market bounce back to the 10dma....  Not too surprised...

Pinto Currency's picture



Perhaps some investors have the view that buying Treasuries, when the Fed is printing money to maintain their price level, is more risky than buying stocks in companies.

jeff montanye's picture

wish the charts above were longer term.  what was the short interest in late 2007 and 2008?  what was mutual fund cash in '65 and '72?  

Mauibrad's picture

Mutual Fund managers panicked selling on the horizon, bitchez?

r101958's picture

"Mutual Fund Outflows Surge As NYSE Short Interest Back To March 2009 Levels... Yet Stocks Refuse To Plunge. Why?"

How about because the TBTF's have too much of their free fed money invested in them? They stand to lose quite a bit if they crash. Who else do we really think is manipulating this market right now? Us?


SheepDog-One's picture

Theyre just not ready for the crash quite yet, these record high shorts ARE the banks...theyll pull it soon enough.

r101958's picture

Yes, I agree. It seems that they will do whatever they need to do to the market to keep oil at around 80 (WTI), gold at around 1600 and silver at about 30. I believe that oil under 80 is not profitable for the source of that market (WTI). All this in an effort to make any grumbling J6P stop grumbling. For those that have been studying and/or watching the markets for a while, TPTB hope that we give up on our hope that there will actually soon be some clarity and reality in the markets.

r101958's picture

...forgot one thing.....and to keep treasuries right about where they are now.

Johnny Lawrence's picture

I agree with Joe Shmoe.  I'm 100% certain the market will be crushed at some point, but these shorts need to be out before it does.  Look at every other point on that chart and you can literally play the opposite game with the amount of short interest and the performance of the market.

Strider52's picture

Well, I think we can all agree that most everything is intentionally misreported. Employment, inflation, bank health, number of traders that are actually human, you name it.

It seems to me that it's entirely possible that the world economy already completely crashed big time, but TPTB can hide it nearly forever. Everything reported, or 'leaked', or rumored, is completely fake.

Ned Zeppelin's picture

A fiat world where the rules are made and changed at a whim.  That is why I think the end game is the enforcement of the "fiat reality," and there will never be a clearing.  Folks "winning" by holding PMs will simply not be allowed. This game has no end.  The markets oscillate up and down, the oscillations calibrated for maximum "skim" each time the crowd gets fleeced.

RickyBobby's picture

If she blows through 11.5K I'll have to take my shorts off. As sure as the sun rises in the east when I take 'em off she'll crater.

CH1's picture

I think that's pretty much the plan.

They know when the plug gets pulled - you don't.

firstdivision's picture

No wonder that short squeeze kicked into such high gear.  Someone bought 5k shares of FAS.

riley martini's picture

5 for 1 reverse split announced for fas today. Would you want to buy it?

pupton's picture

From the chart it appears that short interest spikes at the beginning of big moves to the upside...but what the heck do I know.

Bartanist's picture

Lol ... It is commonly known that massive selling causes prices to go up... The converse is also true.

AbelCatalyst's picture

Yes, contrarian indicator...  However, you have to remember the Baby Boomers are getting closer and closer to retirement and their appetite for risk is quickly diminishing.  These wild swings are making them shart their pants!!  

Their need to conserve $ will quickly outweigh their desire to have a high-end retirmenent.  Once the scale is tipped, it will be like flicking a light switch - They'll say, "if I don't pull out right now I may NEVER retire."  Then you'll see a massive stampede for the exits - first ones out can retire with dignity, last ones out will live in low-end trailer parks!  Don't underestimate the fear of a curtailed lifestyle!! 

They're just beginning to pull out - they're looking around the room to see where the exits are (and if others are moving toward the exits).  Can you hear the light switches clicking on all accross the US?  Can you feel the panic beginning to build?  Seriously, this is a BIG deal, especially in light of the boomers just losing all that RE equity...  The reason they are staying in the stock market is a deep-seated hope that they will make 20% per year again - aint' gonna happen...      

Bartanist's picture

Dignity? Is that like pride? Pride is not a virtue.

Oh, and maybe, tornado magnets aside, a low-end trailer park is a better place to find spirituality than in Naples, FL or Nice, France.

Pinto Currency's picture


Do you remember Ronald Reagan's old saying that the most terrifying words to any business owner are "I am from the government and I am here to help."


If I was a long term bond holder, I'd be terrified of the words "I am Ben.  I am from the Fed.  I am here to help your bonds.  I am going to print, print, print and buy, buy, buy those bonds to help you."


It might even make me buy P&G, J&J, ABX, and ultimately SWHC.

Robslob's picture


jayman21's picture

Hey Tyler - Any idea on average leverage ratio for the MF?  Would be interesting to see how many redemptions turned into short-term loans to cover the outflow vs. a true sale of assets to cover the outflow?

TradingJoe's picture

We are going momo again! Hehehehe me shorting like a BEAR! ::::))))))

adr's picture

The market has been trying to flush for weeks but there is this damn giant log stuck in the toilet with a stupid beard, a big nose, and this stupid grin expressing this flush me if you dare look.

Should have bought a Kohler.


... meanwhile looks like 11k+ is a real posibility at the close, unfuckinreal

CClarity's picture

Toto, we're stuck in the Wizard of Kansas with magical thinking believing that debt will just go poof.

TheFourthStooge-ing's picture

The crapper is clogged with single-ply linen paper.

The toilet went crazy yesterday afternoon.

The plumber, he said, "never flush a tampoon."

This great information cost me half a week's pay,

and the toilet blew up later on the next daaaay-ay-ay-aaaay.

DosZap's picture


NEVER put a Paper hand Towel in one either..............same issue.

SheepDog-One's picture

This just shows when it DOES really come unhinged one of these overnites, there will be no stopping it and total devastation. Which is of course what they planned for all along.

Harbourcity's picture

The market is a horny 16 year-end trying to get into his girlfriends pants, sure she's fighting pretty good but with or without her giving in, he's blowing his load.

Biggvs's picture

So just following the historical logic here... if short interest is at March 2009 levels, then the selloff has already occurred and we should expect a 100% rally in the S&P, no?  :P

pupton's picture

That's what you could infer from the chart, yeah...

rambler6421's picture

It ain't plunging cuz of the Plunge Protection Team.........Duh.

fonestar's picture

"We've got a leak in these pipes!  Quick, call the plungers!"

Comay Mierda's picture

PPT 3:30pm ramp up in effect again


new strategy: buy at 3:30pm sell at 3:59pm

o2sd's picture

Only if it's blood in the morning. Green in the morning means PPT day off. Blood in the morning, PPT arrives on cue at 3:30 with new rumour of a plan to get together to plan a bailout of Europe.


Green in the morning, market is yawning.

Blood in the morning, PPT warning.


doomz78's picture

QE4, QE5, QE6, QE7, QE8, QE9, QE10,  In the form of daily market capital injections into the stock market via JP Morgan Chase and Goldman Sachs.  And not forgetting the help of the CME.  It's a market in perfect balance if fraud and market manipulation are your fetish.  Ben Bernanke and the boys know that Quantitative Easing is not palitable in this political and economical environment.  This is just a theory of mine but having followed the market for over 10 years.  It looks rigged. 

fonestar's picture

S&P500, last bastion of a failed system?  Defend at all costs! 

SheepDog-One's picture

'One day, the selling has to commence' one to sell to....1 man market conundrum.

alien-IQ's picture

The /ES is up about 70 points since yesterdays 3:30pm rumor, despite the fact that it has been proven to have been purely meaningless bullshit.

You gotta admit...this shit is hilarious.

Belarus's picture

I have said it many times here before but i'll say it again: with this kind of short interest, there is no way the market will crash. Record short interest is the ultimate contrary indicator. 

They will ramp this market and fuck every short out there. Only then will stocks be able to crash. until then boys...

Racer's picture

Yep, if the funds refuse to build up cash in the hope they can be saved by the ChairSatan, then short squeeze it is... but then when the evil one does nothing there will be no shorts to soften the waterfall drop, Oct 1987 and the Great Crash will be like minor blips, they will of course try to slow it with circuit breakers but that will only cause more panic like the delays with the tickers during the Great Crash.

The only buyers are the shorters... so no buyers/shorters.... watch out below

Mohan's picture

This is about time CNBS parades some analyst who calls for a new bull market based on short interest only!