It almost never fails does it?  Just as investors posi­tion them­selves for zig.... instead zag hap­pens.  Appar­ently we just saw the largest increase of short sell­ing since 2006 in Sep­tem­ber — which worked out nicely for about 1.75 days in Octo­ber, before this face rip­ping rally of 10%.  One can be sure part of this move upward is those newly placed shorts cov­er­ing — indeed we saw such a vicious move last Tues­day in the clos­ing 45 min­utes, I have to assume many of those posi­tions were har­pooned that day.

• Investors are increas­ing bear­ish trades around the world by the most in at least five years, con­vinced the low­est val­u­a­tions since 2009 will prove no bar­rier to losses after $11 tril­lion was erased from equi­ties.  Bor­rowed shares, an indi­ca­tion of short sell­ing, climbed to 11.6 per­cent of stock last month from 9.5 per­cent in July, the biggest increase since at least 2006..
• Trades that profit when Chi­nese equi­ties decline have reached a four-year high and bear­ish bets in the U.S. are the most since 2009, exchange data show.
• Slow­ing economies are spurring short sell­ers after indexes in 37 out of 45 major coun­tries tum­bled 20 per­cent, the com­mon def­i­n­i­tion of a bear market.

• “The Lehman col­lapse is way too clear in people’s minds,” said Hen­rik Druse­b­jerg, who helps over­see $230 bil­lion as senior strate­gist at Nordea Bank AB in Copen­hagen. “They don’t want to get burned as much again. They know either they get some pro­tec­tion or get out altogether.”
• About 4.1 per­cent of NYSE shares have been bor­rowed and sold, up from 3.5 per­cent at the end of July, data from the bourse shows. U.S. short sales are ris­ing at the second-fastest pace on record after the 2008 finan­cial cri­sis, accord­ing to exchange data dat­ing back to 1995.
• Short sell­ing, where traders bor­row shares and sell them, hop­ing for a decline, is increas­ing even as equi­ties approach the cheap­est val­u­a­tions on record. The MSCI All-Country World trades at 11.8 times reported profit, com­pared with 11.9 in the five months after Lehman’s col­lapse. The measure’s aver­age price-earnings ratio since 1995 is 21, data tracked by Bloomberg show.
• The bond mar­ket indi­ca­tor that has pre­dicted every U.S. reces­sion since 1970 now shows that the econ­omy has a 60 per­cent chance of con­tract­ing within 12 months. The so-called Trea­sury yield curve, adjusted for dis­tor­tions caused by the Fed’s record low zero to 0.25 per­cent tar­get inter­est rate for overnight loans between banks, shows that two-year notes yield 20 basis points, or 0.20 per­cent­age point, less than five-year notes, accord­ing to Bank of Amer­ica Corp. research.

And the last time this happened?

• Bear­ish bets last increased faster in March 2009, the same month the S&P 500 began a bull mar­ket that dou­bled its value.

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