Bears are in pain as the S&P 500 hits record highs. That may mean more upside for stocks.

The S&P 500 hitting record highs is a significant development, especially when considering the positioning of bears, or short sellers, in the market. According to Citi, these shorts have yet to capitulate, which could imply that there is still more upside potential for stocks. This is because when shorts finally do cover their positions, it can create a self-reinforcing upward price movement.

In the context of the current market, this dynamic is particularly noteworthy. Typically, when the market rallies strongly, shorts are forced to reassess their positions, and covering their shorts can accelerate the upward momentum. The fact that shorts have not yet capitulated suggests that there is still some skepticism about the sustainability of the rally, but it also sets the stage for a potential surge in stock prices if and when they do decide to cover.

Going forward, traders should watch for signs of short covering, such as a sudden increase in buying activity or a shift in sentiment indicators. Additionally, market participants will be closely monitoring economic data and corporate earnings reports for any signs of weakness or strength that could influence the trajectory of stock prices. If shorts do indeed capitulate, it could be a signal that the market is poised for further gains, at least in the short term.

Originally reported by marketwatch.com. Trade-News adds analysis for finance & markets readers.