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Low S&P 500 Short Interest is Another Sign Stock Investors Are Overly Complacent

By:

The Founder & Portfolio Manager Of Active Alts, Principal & Co-Manager Of The Advisorshares Ranger Equity Bear ETF

As you can see from the chart below, median short interest on the S&P 500 as a percentage of market cap is the lowest in years.  And that  means hedging against a downturn by shorting also is at its lowest in years. Why has that happened? As the stock market continues to move up an increasing number of investors are becoming convinced that there’s no downturn in sight.

So, there’s no need to protect their financial well-being. Since investors historically are wrong about calling market tops and bottoms, for us, this is another warning sign among many we’ve talked about in recent weeks to take defensive measures, including cashing out on stocks with big appreciation.  Which is what we’ve done in the long/short portfolio we manage. (See this week’s LMTR sentiment update)

Meidan s&p 500 stock short interest as % of market cap

Originally Posted on August 28, 2020 – Low S&P 500 Short Interest is Another Sign Stock Investors Are Overly Complacent

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