Bullish Signs

At 1,110, the Standard & Poor's (MHP) 500-stock index is up almost 23% for the year, and investors don't seem to be betting on a pullback. The S&P 500's short interest ratio—the number of shares borrowed and sold short, divided by a stock's average daily trading volume—dropped to 2.7 at the end of October, a low not seen since May, when the S&P 500 traded around 900.

Typically, the higher the ratio, the more investors believe prices will fall. "If the short interest gets smaller, it's a bullish signal," explains Hans R. Stoll, a finance professor at Vanderbilt University's Owen Graduate School of Management. Sectors with the lowest ratios include energy, materials, health care, and tech. Just six S&P 500 companies have ratios above 10: Rockwell Automation (ROCK), Fastenal (FAST), Sears Holdings, (SHLD) Vulcan Materials (VMC), M&T Bank (MTB), and Waste Man- agement (WM).