Last week we talked about the volatility index, an indicator that the stock market might be due for an upswing. Here's the other side of the equation: in the month of October, short selling increased at its quickest pace since 2006. Borrowed shares, the sign of a short sale, now constitute 11.6 percent of outstanding shares on the American market.
Overall, the percent of short sales is at its highest level since 2009. About 4.1 percent of the shares on the NYSE have already been borrowed and sold, up from 3.5 percent in July. Since short selling is a bet that a stock will decrease in price, this can be taken as an indicator of a further market decline.
Of course, that's only one indicator. Bloomberg News yesterday released the results of a poll of economists, who predicted that the S&P 500 would grow by 13 percent between now and the end of the year. If that happens, there are going to be a lot of disappointed short-sellers out there.
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