Short interest levels for the middle of December were released yesterday and showed that short sellers haven't been this gun shy since 2007. The chart below shows the average short interest as a percentage of float (SIPF) for stocks in the S&P 500. At a current level of 4.15%, the average SIPF hasn't been this low since December 2007.
While the decline in short interest levels is indicative of the market returning to its more normal footing from the chaos of the credit crisis, the question that bulls need to answer is that with an increasing number of short sellers moving to the sidelines, or even the bullish side, is there anyone left to convince?
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