ORTEX Monthly Recap for September


ORTEX Perspectives on the S&P 500 for September

September marked the worst monthly performance of the year for the S&P 500 and Nasdaq Composite. The broad S&P 500 index finished the month down 4.9% and the quarter 3.7% lower, while the technology-heavy Nasdaq Composite dropped 5.8% in the month and 4.1% in the quarter. The blue-chip Dow ended the month 3.5% lower and the quarter 2.6% in the red. But the indexes are still up on the year despite the pullback, underscoring the strength of the rally seen in the first half of the year. The S&P 500 is down about 6% from its 2023 high close in July, but still up 11% for the year. ORTEX Short Interest Data showed bearish bets rose across the board last month as share prices fell in September. Short interest (SI) shares in the Materials sector rose the most, up 14.42%, while Real Estate stocks saw the smallest increase, up by 0.29%.

Unsurprisingly, short sellers recorded a strong profit in September as stocks sputtered. In the aggregate, the bears made $25 billion in September.

With earnings season coming to an end in September, there have been few changes in forward-looking earnings estimates from Wall Street. For the second month running, energy stocks received the largest increase in EPS estimates, up 2.92%. EPS estimates for the Materials sector fared the worst and was the only sector to record a decrease in EPS estimates in September, down 0.12%.

Total Insider activity fell in September compared to August, with total activity falling from $8.8 billion to $5.4 billion, of which 21%, or $1.1 billion, was Insider buying activity, according to ORTEX Insiders Data. However, in a similar vein to last month, only a small portion (2.50%) of the total buying activity was ranked as Medium or High trade significance, meaning the majority of this activity was not based on conscious decisions, rather the result of exercise of share options.

On the options front, positive order value for SPY more than doubled compared to last month to $9.42 billion, while negative order value for the fund was $8.5 billion. That positive order value ratio of 52% represents a significant increase in sentiment among options traders, compared to August’s figure of 36.95%.

Market developments in September

U.S. stocks closed out a weak September with another wobble, as high Treasury yields and oil prices took their toll alongside a growing realization that the Federal Reserve’s high-altitude interest rates could be with us for a while. The Federal Reserve announced it would keep interest rates steady but suggested that more hikes were on the horizon and that rates may remain higher for longer than previously expected. Central bank officials said they would hold interest rates steady at their highest rate in 22 years but predicted in their “dot plot” that there would be at least one more hike this year and that cuts in rates wouldn’t begin until June of 2024, later than previously signaled.

Not even seemingly “good” news on inflation was enough to lift the market’s spirits. The latest reading of the personal consumption expenditures price index, which is the Federal Reserve’s preferred inflation metric, came Friday morning. So-called core PCE, which strips out volatile food and energy prices, rose 0.1% in August and 3.9% annually. Economists expected that the core PCE would advance 0.2% on a monthly basis and 3.9% year over year. Late on Friday 29th, investors were pricing in a 14% probability that the Federal Open Market Committee (FOMC) will raise its benchmark rate from its current 5.25% to 5.50% target range following its October 31 to November 1 meeting, according to the CME FedWatch Tool. By comparison, odds were pegged at 19% Thursday and nearly 28% a week before. In the coming week, investor attention will turn to a string of reports offering insight into the health of the labor market, including Friday’s all important monthly payrolls data.

September’s Top Performing Trading Signal

On September 7th, ORTEX generated an RSI (Type 2) 80 to 90 Trading Signal for Canopy Growth Corporation (Nasdaq:CGC) based on historical trading activity.

Shares of the cannabis company surged after the Department of Health and Human Services asked the Drug Enforcement Agency to consider easing restrictions on marijuana upon a review of its classification under the Controlled Substances Act. It could be a significant catalyst for an industry hemmed in by federal regulations even as legalization picks up on the state level. The signal returned 110.75% over the prior best holding period of 10 days, making this the best performing ORTEX Trading Signal in September.

Please note that ORTEX Trading Signals are based on historical performance and are not investment advice.

Highest Short Seller Gain and Loss for September

Exxon Mobil (NYSE:XOM) was the biggest loser for short sellers, as bears lost $245 million in the stock in September. Exxon witnessed a significant milestone as its shares soared to an unprecedented all-time high of $120.70 due to the ongoing surge in crude oil prices, which even surpassed $95 per barrel, a feat not seen in over a year. The dollar value of short interest in Exxon  has risen by 30% in September, as ORTEX data shows short interest now stands at $5.03 billion, up from $3.87 billion last month.

The big winner for the bears last month was Apple (Nasdaq:AAPL). In a tough month, Apple fell 9% in August and given its high dollar value of short interest, short-sellers reaped $1.7 billion in gains from betting against the company, the most profitable short trade in September. Apple’s share price tanked 6% in just two days at the start of the month after reports that Chinese government workers have been banned from using iPhones. Apple also released its latest iPhone 15 models, but has faced overheating complaints from customers which has affected the share price.

Please note that ORTEX Trading Signals are based on historical performance and are not investment advice.

Short Squeeze Candidates with the Highest ORTEX Short Scores

Waldencast currently has the highest ORTEX short score on our platform (with at least 3 analysts covering the stock), coming in at 96.11 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.

Stock Market cap USD Sub-Industry Short Score Estimated Short Interest % FF
Waldencast $      1,150,672,895 Personal Care Products 96.11 12.34
The Lion Electric Company $          431,625,091 Machinery 95.41 18.7
Cipher Mining Inc. $          584,726,881 Software 93.74 28.72
Fisker Inc. $      2,203,600,722 Automobiles 93.59 45.37
Beyond Meat $          619,391,309 Food Products 92.53 41.49
SmileDirectClub $             55,603,426 Health Care Equipment and Supplies 92.08 23.86
ChargePoint Holdings $      1,789,468,310 Electrical Equipment 91.03 22.54
Prime Medicine $          869,661,668 Biotechnology 91.01 17.22
MicroVision $          411,245,370 Electronic Equipment, Instruments and Components 90.80 23.76
Enliven Therapeutics $          562,124,176 Pharmaceuticals 90.02 42.17