NYSE Short Interest At Post-2008 High

The biggest debate on Wall Street in 2016 has been whether or not global economic weakness will push the U.S. into a recession in 2016 and lead stocks into a new bear market. According to the most recent NYSE short interest numbers, a growing number of traders are betting on a market downfall in the near future.

In the past two months, short interest in the NYSE is up 4.5 percent to above 18 billion shares for the first time since the Financial Crisis.

In terms of short interest as a percent of float, the current level of around 4.3 percent represents a post-crisis high, but it still well short of the 2008 peak near 5.75.

Related Link: Market Bull: S&P 500 Could Fall More Than 30% 

The climbing short interest could mean that the market is on the precipice of another collapse, which would be good news for investors in short ETFs such as ProShares Short S&P500 (ETF) SH or safety plays like SPDR Gold Trust (ETF) GLD. However, the high short interest could lead to a massive short squeeze if the market shows signs of moving higher at some point.

For traders that are uncertain of the direction the market will move, the climbing short interest could mean that a direction-neutral volatility play, such as the iPath S&P 500 VIX Short Term Futures ™ ETN VXX, is the best play.

Charts on ZeroHedge from Bloomberg.

Disclosure: the author holds no position in the stocks mentioned.