$62 billion and counting: ASX short sellers are on the hunt ahead of reporting season

Another reporting season is here, which means it's another moment for the market to cross its fingers and hope for the best. 

As Morgans wrote in a recent report, "The market remains acutely sensitive to short-term earnings momentum, contributing to much more volatile-than-usual price responses to results, trading updates and other events over the last 1-2 years."

Unfortunately for investors, that momentum generally flows in one direction. 

Since Spring 2025, only 7 of 21 ASX subsectors have seen positive revisions to FY27E EPS forecasts. And it's the obvious sectors that have been propping up the ASX 200's EPS growth we've seen over that time. 

Resources, energy, mining and banks have done almost all of the heavy lifting in terms of forward EPS upgrades, with CY26F EPS growth expectations up 13%.

Those companies are also the ones that have driven the ASX 200's headline returns. It means the situation for the rest of the market is a precarious one. As Morgans put it simply. 

"Outside of these heavyweight sectors is a very different story."

And that is where the short sellers are hunting.  

According to Morgans, total short interest on the ASX now totals $62 billion, 34% higher than it was in February. As you can see from the chart below, short interest has tracked upwards alongside the ASX 200 following the Iran War-inspired selloff in April. 

But as has become the theme with the ASX in recent times, that ostensible correlation masks sharper dislocation below the surface. Large cap miners and banks have been driving the returns, but not those that are necessarily attracting short sellers.

Instead, says Morgans, shorters are going for companies across the spectrum. 

"As the macro clouds the outlook, short sellers are targeting stock-specific risks in a few key names including growth/high PE names (4DX, BRG, CAR, COH, DMP, DRO, SLX, TLX, and WTC) select resources (LYC, PDN), and cyclicals (EDV, ELD, and FLT)," wrote Morgans.

4DMedical (ASX: 4DX) and Genesis Minerals (ASX: GMD) are two stocks that have flown high in recent years but are now seeing short interest tick up aggressively. 

While Lotus Resources remains the most-shorted stock, according to ASX data, it's the companies that could disappoint on FY26 results that will be on the radar for short sellers. 

Even the ASX 20 powerhouses may not be immune in the unlikely event they miss on results.

Given how volatile and momentum driven the market has become, the spectre of short sellers is one more complication in what is shaping up to be another dramatic reporting season.