Monthly NYSE Short Interest
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This month's reported NYSE Short Interest is unchanged from last month. It remains at its highest level in years, which indicates a very high level of investor fear of a decline in equity prices. Investors are clearly anticipating that the market will decline and are either protecting their current positions from downside risk, or are trying to position their portfolios to profit from the decline. The high short interest may also be partly due to the large number hedge funds that participate in 'pairs' trading in which the fund is short one company or index, and long a similar, related company or index. It seems to me that regardless of the strategy being used, the short position represents a degree of skepticism towards the current level of equity prices. So from a contrarian sentiment point of view, the current level of NYSE short interest is favorable towards equities.
