ORTEX Perspectives on the S&P 500 for May
It was a mixed month for three three major averages in May. The Nasdaq Composite ended May with a 5.8% gain as enthusiasm around AI continued to boost related stocks. Outside of tech, gains were hard to come by, however. The S&P 500 inched up 0.3% in the month, while the blue-chip Dow fell almost 3.5%. ORTEX Short Interest Data showed all sectors, apart from Utilities, saw a rise in bearish bets last month. Short interest (SI) shares in the Utilities sector fell 2.03%, while Communication Services stocks saw a 10.18% jump in SI shares.
Short-sellers once again closed out the month with a profit. In the aggregate, the bears made $2.7 billion in May.
With Q1 earnings continuing throughout May, there have been some significant changes in forward-looking earnings estimates from Wall Street. Financial stocks saw the largest increase in EPS estimates, up 6.83%, while profitability forecasts for the energy sector fared the worst for the second month running, down 3.96%.
Total Insider activity almost tripled in May compared to April, with Insider buying activity dramatically rising, up from $20.8 million in insider purchases in April to $674 million in May, according to ORTEX Insiders Data. Most importantly, 97% of the total buying activity was ranked as High trade significance, meaning this activity was based on conscious decisions, and not just the result of exercise of share options. Insider selling activity also rose in May, from $1.88 billion to $4.78 billion. That translates into an insider buying ratio of 12.36% across all levels of Trade Significance.
On the options front, positive order value for SPY was $3.12 billion, while negative order value for the fund was $3.49 billion. That positive order value ratio of 47.1% represents a large increase in sentiment among options traders, compared to April’s figure of 38.7%.
Market developments in May
May saw more companies reporting Q1 earnings and again, the clear trend was outperformance of the tech-heavy Nasdaq, due in large part to the excitement around artificial intelligence. No stock has ridden this wave of enthusiasm more than Nvidia (Nasdaq:NVDA), as the chipmaker’s shares surged 180% in 2023, becoming the first chipmaker to hit a $1 trillion valuation.
A primary concern for investors in May has been the debt ceiling negotiations, which had stalled as the two sides could not agree on terms, and the threat of default on June 5th became a more and more realistic outcome. However, the House passed debt-limit legislation forged by President Joe Biden and Speaker Kevin McCarthy that would impose restraints on government spending through the 2024 election and avert a destabilizing US default. The legislation would result in $1.5tn in savings over a decade, the non-partisan Congressional Budget Office said.
In April 2023, prices had increased by 4.9% compared to April 2022 according to the 12-month percentage of change in the consumer price index. The FOMC announced a 25-bp hike on May 3rd, taking the upper bound of the funds rate to 5.25%. Whilst this marks a slight deceleration in inflation, and the lowest annual pace since April 2021, inflation is still running at more than double the Fed’s 2% target. Whilst there remain plenty of reasons to keep hiking rates, Federal Reserve officials are signaling they plan to keep interest rates steady in June while retaining the option to hike further in coming months, which undercuts the importance of the upcoming monthly jobs report due Friday June 2nd. Governor Philip Jefferson, who’s nominated to be vice chair and who often echoes Chair Jerome Powell’s views, said on May 31st that skipping an increase would give policymakers time to assess data but not preclude future tightening. After Jefferson’s remarks, traders scaled back the odds of a rate hike at the June 13-14 Federal Open Market Committee meeting to about 35%, from nearly 60% a day earlier.
May’s Top Performing Trading Signal
On May 18th, ORTEX generated an Event AGM Day Before Trading Signal for Aemetis, Inc. (Nasdaq:AMTX) based on historical trading activity.
Shares of Aemetis soared after the company said the U.S. Environmental Protection Agency approved a subsidiary’s renewable natural gas production facility. The EPA approved Aemetis Biogas Services’ facility for the generation of D3 Renewable Identification Numbers under the Renewable Fuel Standard. The renewable natural gas produced by Aemetis is expected to generate several revenue streams, including the sale of renewable natural gas for transportation use to replace petroleum diesel, and for the sale of Inflation Reduction Act Production Tax Credits, beginning in 2025. As such, analysts made substantial upgrades to this year’s sales and revenue forecasts for Aemetis, helping drive the price even higher. The signal returned 126.6% over the prior best holding period of 5 days, making this the best performing ORTEX Trading Signals in April.
Please note that ORTEX Trading Signals are based on historical performance and are not investment advice.
Highest Short Seller Gain and Loss for May
For the third time this year, Tesla (Nasdaq:TSLA) was the biggest loser for short sellers. Bears lost over $3.4 billion in the stock throughout May. Since the beginning of the year, Tesla has risen 87%, with shares of the electric vehicle giant up by 25% in May. Whilst there have been fluctuations in Tesla’s short interest level throughout May, the net result shows bears are mostly unchanged, as ORTEX data shows short interest stands at 101.64 million shares, or 3.75% of free float.
The big winner for the bears last month was Paramount Global (Nasdaq:PARA). The Hollywood giant’s shares gapped down nearly 30% at the start of the month after the media company’s results, reporting a steep first quarter loss and said it would cut its dividend, the latest sign of the challenges faced in pivoting to streaming. Paramount’s results were dragged down by major charges related to its cancellation of certain programming, a soft ad market that weighed on its TV business, and rising costs for its flagship streaming service. Short-sellers reaped $758 million in gains from betting against Paramount, the most profitable short trade in May.
Short Squeeze Candidates with the Highest ORTEX Short Scores
MicroVision currently has the highest ORTEX short score on our platform (with at least 3 analysts covering the stock), coming in at 99.19 out of 100. Our ORTEX Short Score uses a multi-factor model that incorporates multiple short-related metrics, with a higher score indicating that the stock is heavily-shorted and has other characteristics that increase the possibility of a short squeeze occurring.
|Ticker||Stock||Market cap USD||Industry||Short Score||Estimated Short Interest % FF|
|MVIS||MicroVision||787284030||Technology Hardware and Equipment||99.19||27.09|
|BYND||Beyond Meat||664746448||Food, Beverage and Tobacco||98.12||44.38|
|PRME||Prime Medicine||1240531264||Pharmaceuticals, Biotechnology and Life Sciences||96.28||16.40|
|HYZN||Hyzon Motors Inc.||148424115||Capital Goods||95.14||23.68|
|FSR||Fisker Inc.||2126825475||Automobiles and Components||95.00||34.89|
|CRCT||Cricut||1946708489||Consumer Durables and Apparel||93.97||13.80|
|LCID||Lucid Group||14135438010||Automobiles and Components||93.10||23.42|
|BROS||Dutch Bros Inc.||1652884369||Consumer Services||92.35||21.00|