Short Sellers Still Targeting Retail, Biotech ETFs

After a huge second half of 2020, the S&P 500 is off to another hot start to 2021. With stock market valuations getting more bloated by the week, there are plenty of skeptics that believe certain stocks and sectors have come too far too fast.

There is currently $244 billion in aggregate domestic ETF short interest, according to S3 Partners analyst Ihor Dusaniwsky. Over the past month, Dusaniwsky said short sellers have increased their exposure by about $14 billion.

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As of Wednesday, here are the six most heavily shorted domestic ETFs:

• SPDR S&P 500 ETF Trust SPY, $60.5 billion in short interest.
• iShares Russell 2000 Index IWM, $20.9 billion in short interest.
• PowerShares QQQ Trust, Series 1 QQQ, $19.7 billion in short interest.
• iShares iBoxx $ High Yid Corp Bond HYG, $11 billion in short interest.
• iShares MSCI Emerging Markets Indx EEM 2.12%, $9.5 billion in short interest.
• SPDR S&P Biotech XBI, $7.9 billion in short interest.

Short Percent Of Float: By far the most heavily shorted ETF is the SPY ETF, which tracks the S&P 500 and represents a simple bet against the U.S. stock market and/or a hedge against long positions in U.S. stocks. In the past 30 days, SPY short interest has increased by $4.8 billion. When it comes to short percent of float, however, the XBI Biotech ETF has the highest of the six ETFs mentioned above at 94%.

While it didn’t crack the top six, Dusaniwsky said the SPDR S&P Oil & Gas Exploration & Production ETF XOP has seen the largest percent increase in short interest so far in 2021. XOP short increase is up 27% to $2.6 billion year-to-date.

At the same time, short sellers have been jumping ship on the iShares Core US Aggregate Bond ETF AGG. AGG fund short interest is down 42% year-to-date to $1.9 billion.

Here are the six ETFs with at least $25 million in short interest that have the highest short percent of float, according to S3:

• SPDR S&P Retail XRT, 195% of float.
• SPDR S&P Biotech XBI, 94% of float.
• SPDR S&P Oil & Gas Exploration & Production ETF XOP, 89.7% of float.
• iShares iBoxx $ High Yield Corporate Bond ETF HYG, 49.4% of float.
• SPDR S&P Regional Banking ETF KRE, 44.1% of float.
• iShares Expanded Tech-Software Sector ETF IGV, 39.4% of float.

Benzinga’s Take: The highest short percent of floats data is an indication of where short sellers see the most potential weakness in the market. Short sellers are betting most aggressively against retail stocks, volatility and biotech stocks.