Bespoke: Not a Short Covering Rally / Just a Short Covering Rally? Compare & contrast :-)

Article today from the Bespoke website I found interesting:

Not a Short Covering Rally
Monday, June 11, 2012 at 03:12PM

The average S&P 500 stocks is up 3% since the close on June 1st. Typically during bounces during an overall downtrending market, all we hear is that “this is nothing but a short covering rally.” We didn’t hear this much last week, however, and it’s interesting to see that the numbers show that it really wasn’t a short covering rally. In fact, the least heavily shorted stocks have significantly outperformed the most heavily shorted names since June 1st.

http://www.bespokeinvest.com/thinkbig/2012/6/11/not-a-short-covering-rally.html
(The article then goes on to explain their methodology and results.)

It brought to mind a previous post on the Bespoke website, back in Sept. 2011:

Just a Short Covering Rally?
Tuesday, September 27, 2011 at 06:21PM

The market gain we’ve seen over the last three days has been quickly dismissed as nothing but a short-covering rally by seemingly anyone and everyone that has opined on the subject. But has it really been a short covering rally? If it has been, shouldn’t the most heavily shorted stocks be rallying the most?

To find out, we broke the S&P 500 into deciles (10 groups with 50 stocks each) based on short interest as a percentage of float and then calculated the average performance of the stocks in each decile since last Thursday’s close. In a true short covering rally, the decile of stocks with the highest short interest will significantly outperform the decile of stocks with the lowest short interest, and the performance will get better and better as you move up the decile chain from lowest to highest. As shown below, however, the performance of deciles based on short interest during the current rally has been completely scattered, with no deciles standing out.

http://www.bespokeinvest.com/thinkbig/2011/9/27/just-a-short-covering-rally.html

Have a look at your charts from Sept 2011 (and following). Here is a chart from StockCharts that anyone can reproduce:

OK … now what I found really interesting was this big difference between these two posts; this from Sept. 2011:
The market gain we’ve seen over the last three days has been quickly dismissed as nothing but a short-covering rally by seemingly anyone and everyone that has opined on the subject.

Now, compare to the comments from the recent post:
Typically during bounces during an overall downtrending market, all we hear is that “this is nothing but a short covering rally.” We didn’t hear this much last week, however,

This appears to be a big difference in market perceptions. In Sept 2011 the rally was contemptuously dismissed, not so this time. Of course, the falls leading to the Sept. 2011 ‘short-covering rally’ were greater than the falls recently. Maybe this accounts for the differences in perception?

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