It has been difficult to listen to so many market commentators call the gains we've seen since last Monday nothing but a short covering rally. The worst part is that the claim is made with no data backing it up. We ran our decile analysis on the S&P 500 to see what the actual numbers show.
To run the analysis, we broke the S&P 500 into deciles (10 groups with 50 stocks each) based on a stock's short interest as a percentage of float. We then calculate the average percentage change of the stocks in each decile from the close on June 24th through today.
The average stock in the S&P 500 is up 5.4% since June 24th. As shown below, the 50 stocks that have the highest amounts of short interest have averaged a gain of just 5.2%. The stocks in the second most heavily shorted decile are only up an average of 4.9%. With the top two deciles of the most heavily shorted stocks both underperforming the overall market, it's hard to call this a short squeeze rally.