Fewer investors are betting on stock-price declines as the market has already suffered and more cash has moved to the sidelines, a bullish indicator, strategists say.

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Fewer investors are betting on stock-price declines as the market has already suffered and more cash has moved to the sidelines, a bullish indicator, strategists say.

Short interest, or the number of shares “sold short” on the New York Stock Exchange has fallen by 26 percent from its peak this summer of more than 18 billion shares. Short selling is accomplished by selling borrowed shares with the hope of profiting by buying them back later at a lower price.

The drop in short interest suggests many bears are switching to the bullish camp, but experts say the figures more likely reflect continued “deleveraging” or unwinding of investments made with borrowed funds.

Last month, investors pulled nearly $40 billion out of hedge funds, which are among the market’s biggest short sellers. Hedge funds and other institutional investors have also had to close short positions to meet margin calls, or requests from lenders for additional capital to cover losses. This has left fewer funds available for strategies that involve short selling, says Jack Ablin, chief investment officer at Harris Private Bank.

The declines in short interest also reflect doubts on the part of short sellers that there’s much downside from which to profit, says Sam Stovall, chief investment strategist at Standard & Poor’s. “Much of the negative news is gone,” says Stovall, noting the S&P 500 has given back more than 100 percent of the gain from the previous bull market. It’s down 40 percent year to date.

Bearish bets have declined in all sectors in November, with real estate and insurance the only groups seeing higher levels of shorting activity, according to research by Bespoke Investment Group.

The Associated Press