There are no shortage of angry skeptics out there. The fiscal cliff is just the latest on a laundry list of reasons to be concerned about this rally. Let us not forget the other “worries” we’ve heard during the past couple years:
1) U.S. Labor Market & Economic Issues
2) European Debt Crisis
3) JP Morgan’s Infamous Trade Blunder by the “London Whale”
4) Facebook’s IPO Disaster
5) China Slowing Economy
I’m sure this list could easily move into the double-digits, but you get the point. One group of skeptics that caught my eye this morning were the short sellers. This loud and vocal group has been betting against this rally for quite some time. Take a look at this chart below.
The most recent short interest figure on S&P 500 stocks shows total short interest ticked up once again. The most interesting thing is that this figure is at its highest level since June of this year. As you can see below, June was a pretty good time to be a buyer.
It might be hard to believe, but the S&P 500 is actually in a bull market and is only about 11 percent below its all-time high. Remember, market tops historically occur when their is an abundance of optimism and euphoria surrounds the market. Well, I don’t want to buy “low prices”, I want to buy “low expectations.” There is a lot of money to be made during highly doubted bull markets. For that reason. the potential upside still outweighs the downside for U.S. equities.