Bearish bets eased in late July, stock exchanges said, suggesting investors retreated to the sidelines as U.S. equities closed out their best month in a year.
Short interest on NYSE dipped 0.5 percent in late July compared to the middle of the month, while short bets decreased by 1.1 percent on the Nasdaq.
Investors who sell securities "short" seek to profit from a falling stock price by borrowing shares and then selling them in the hopes of buying them back at a cheaper price, pocketing the difference.
However, investors can be caught in a short squeeze if prices rise instead and July's gain of nearly 7 percent for the S&P 500 forced them to abandon their bets.
"Shorts know that if something breaks, they'll have plenty of time to get in," said Harry Strunk, managing director of Aspen Grove Capital Management in West Palm Beach, Fla.
"Without any clear signals right now, they've probably gone a little bit to the sidelines with a wait and see attitude."
As of July 30, short interest fell to about 13.69 billion shares on the NYSE, compared to a revised 13.75 billion shares as of July 15. The mid-July figure was originally reported at 13.76 billion shares.
The short interest was equal to 3.58 percent of the total shares outstanding, the exchange said.
On Nasdaq, short interest fell to about 7.34 billion shares, compared to 7.42 billion shares. This is 3.37 days' average daily volume, compared to an average of 2.99 days for the previous reporting period, the exchange said.
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