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Short Sellers Signal a Bull Market

From the desk of Dan Seder, CFA, CMT, CFP®

Since the market bottomed in March, net shorts – as measured by S&P 500 future positions – have been at bearish levels not seen since 2011. Short positioning like this does not typically occur at market tops. However, positioning has begun to shift – a potential sign that hedge funds are getting less bearish and another catalyst for markets to head higher. Yet another example of this hated market rally inducing “the pain trade”.