Selling a stock short means borrowing shares from a broker to sell with the idea that you can buy the shares back at a lower price and deliver them back to the broker, while you keep the profit.  The above chart shows the level of short interest on the New York Stock Exchange, which has spiked up considerably. 

This is what we call a contrarian indicator; you can see it has signaled market lows in the past.  In the three previous short interest peaks, the S&P 500 Index returned an average of 27.1% the following 12 months. 

If you’re like many folks who look at this stuff and say, “huh?” . . . let me say that this is good news, and only happens near stock market bottoms.  So there is light at the end of the tunnel, and it’s not a train!

Stay tuned . . .

Note:  Chart courtesy of JPMorgan Asset Management.

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