Part of the natural push and pull in the stock market is investors taking short positions in stocks while others are buying. The same occurs with ETFs. John Stewart from Schaeffer Research does an excellent job of explaining short interest and how it affects Exchange Traded Funds (ETFs).
"Short interest is the total number of shares that have been "sold
short" by investors looking to capitalize on a downward move in a
stock, or in this case, an ETF. This is an important figure to analyze
because it gives critical insight into the sentiment backdrop for
certain sectors and broad-market indices. In addition, short interest
represents potential built-in buying power, should the security rally
to the point where investors who are short must buy back shares in
order to limit their loss; this phenomenon is referred to as a
short-covering rally."
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.