Short sellers are ramping up bets against US stocks even as paper losses on the positions surpass $US100 billion .
Total US short interest, or the amount that traders have spent betting against US equities, exceeded $US1 trillion this month as the SP 500 Index extended its advance, S3 Partners data show. The tally reached the highest since April last year before retreating slightly with stocks down for a third straight day.
Stocks declined on Wednesday as Fed chairman Jerome Powell warned anew that higher rates would be needed to combat inflation.P 500’s roughly 14 per cent rally in 2023 will run out of steam, and they’re enduring steep losses as they wait for the market to turn in their favour. On paper, the positions are down about $US101 billion this year, according to S3.
“There’s a hand-and-glove relationship between the success the market has had and the pessimism that builds up as that success grinds higher,” said Arthur Hogan, chief market strategist at B. Riley Wealth. Building bearish sentiment could prove to be a source of support for the market, Hogan said. If shorts continued to be on the wrong side of the trade, they may need to buy back stocks to exit their positions, which could further boost equities, he said.