Short interest in the Russell 2000 just hit 8.0% of shares outstanding—highest level since at least 2019. That's nearly doubled since January.
For context: before the 2022 bear market, small-cap short interest sat around 3.5%. Now it's more than twice that.
Meanwhile, $SPY short interest is at 9.0%—below its 2024-2025 average of 10.0% and well under the 15.0% average from 2020-2023.
Small caps have been brutalized. The S&P 500 outperformed the Russell 2000 by 9.6 percentage points in Q3—the widest gap since Q1 2020.
When positioning gets this lopsided, you have to ask: is this crowded trade setting up for a violent unwind? Short squeezes don't need a fundamental reason—just a spark and too many people on the same side.
Watch small caps closely. The setup is there.
For context: before the 2022 bear market, small-cap short interest sat around 3.5%. Now it's more than twice that.
Meanwhile, $SPY short interest is at 9.0%—below its 2024-2025 average of 10.0% and well under the 15.0% average from 2020-2023.
Small caps have been brutalized. The S&P 500 outperformed the Russell 2000 by 9.6 percentage points in Q3—the widest gap since Q1 2020.
When positioning gets this lopsided, you have to ask: is this crowded trade setting up for a violent unwind? Short squeezes don't need a fundamental reason—just a spark and too many people on the same side.
Watch small caps closely. The setup is there.