US Stock Fear Gauges Top 2008 Crisis Levels as Short Selling, Options Hit Extremes

Investor sentiment indicators in the U.S. stock market have moved into extreme territory beyond levels seen during the global financial crisis, pointing to a sharp increase in anxiety across the market.

BeInCrypto reported on April 7 that the ROBO put-call ratio, which reflects retail investor options flows, rose to 1.0. That topped the 0.91 reached during the 2008 financial crisis and the 0.95 seen during the 2020 pandemic.

The ratio measures the balance between retail purchases of put options, or bets on declines, and call options, or bets on gains. A higher reading indicates stronger market fear.

BeInCrypto said the latest reading means retail investors are buying puts and calls at nearly the same level, a sign that fear has become excessive.

Broader market sentiment is also showing signs of stress. CNN's Fear & Greed Index fell to 23, entering the "extreme fear" zone.

Institutional positioning has also become more heavily skewed to the bearish side. Median short interest in the S&P 500 stood at about 3.7%, the highest in 11 years. The Nasdaq 100 was at about 2.7%, the highest in six years, while the Russell 2000 reached about 5.0%, the highest in 15 years.

It was the first time since the 2010-2011 European sovereign debt crisis that all three major indexes posted elevated short-interest levels at the same time. That suggests bearish bets are spreading across the broader market rather than being concentrated in a single sector.

Global equity short positions held by hedge funds have also risen to their most aggressive level in 13 years. Short positions were calculated at 7.6 times long positions.

With both retail and institutional investors moving to extremes in fear and bearish positioning, even a modest positive catalyst could trigger a sharp rally fueled by large-scale short covering.