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The Short Ratio Index calculates the short ratio of the U.S. market. It sums the short selling volume and the total volume for every U.S. stock (From different exchanges: NYSE, NASDAQ, AMEX...). The first sum is then divided by the second sum to produce the Short Ratio Index.
Short selling data must be downloaded using the following item: Short Selling Data. This downloader allows you to create a short selling database for all U.S. stocks. This data must be available in order for this composite to work.
The Short Ratio Index symbol name is "_SHORT_INDEX". The "Volume" field contains the number of stocks that contains short sale information. This data was added to the composite using the "Functions.SetCompositeDataInVolumeField" function of the composite scripting feature.
Because the short selling data is available starting from of August 2009, the composite data starts from this date.
A reading of 0.4, for a particular date, means that short sales accounted for 40% percent of the total volume for that date.
A low Short Ratio Index value means that the short volume or the number of shares involved in a short transaction is lower than the long volume or the number of shares involved in a long transaction, and this is usually interpreted as a bullish sign.
A high Short Ratio Index value means that the short volume is higher than the long volume and this is generally interpreted as a bearish sign.
The index values do not vary a lot and extreme values are very rare. During August 2009 and February 2010, the Short Ratio Index ranged between 0.3 and 0.5.
If you want more details on how this composite was created, you can read the following 2-part post: Short Index