About the only people gnashing their teeth are short sellers, the investors who make a living betting that stocks will fall in price rather than rise. Short-selling hedge funds are down nearly 15% from the start of this year through October, according to hedge-fund tracker HFR.

Last week was another miserable one for those hedge funds and other grumpy investors who are skeptical of the market’s rise. The Dow Jones Industrial Average rose for the seventh week in a row, finishing at 16064.77. On Friday, the S&P 500 closed above 1800 for the first time.

There are few investors dedicated to wagering against stocks. James Chanos of Kynikos Associates runs a hedge fund that largely places short wagers, but there are only 24 other such firms, HFR says. Overall, these shorts manage about $6.3 billion, down from a peak of $7.8 billion in 2008.

But many more investors place bearish bets as part of their overall investing strategy. There are nearly 3,700 “long-short” hedge funds that invest in stocks, managing a total of $686 billion. Lately, these traders have had to adjust their strategies in significant ways to squeeze out returns during the market’s rally, or to just keep themselves going.

“Clearly, there’s been a tremendous amount of pain on the short side, and people are giving up on shorting individual stocks,” says Alan Fournier, who runs Pennant Capital Management. The hedge fund manages $6.5 billion, buys and shorts stocks, and is up more than 10% so far this year, according to investors.

Pennant has profited from shorts against BlackBerry Ltd., which has faced pressure on sales, and developer St. Joe Co., which has tussled with short sellers over the value of land holdings.

“Funds that are dedicated to short selling are closing, and others are starting long-only funds,” which buy shares but don’t short them, Mr. Fournier says.

Some bearish investors are exiting short positions more quickly than usual when their bets turn negative, trying to keep losses to a minimum. Others are reducing wagers they had placed against the broader market, to avoid further pain if the rally continues. Some of these investors continue to maintain bearish bets on individual companies they suspect will run into trouble. Still others are shifting to shorting emerging-market stocks and pockets of weakness in the U.S.

In any case, these investors have been licking their wounds.

“Being bearish in the bull market has been, thus far, a mug’s game and a hedge against profits,” says Douglas Kass, who runs hedge fund Seabreeze Partners Management in Palm Beach, Fla., and has been wagering against the market.

Lately, Mr. Fournier of Pennant has been avoiding using futures, options or other instruments to bet against the broader U.S. market. He dabbled with some of these bets in June but exited them when he saw indications that the market’s strength would continue.

Some market skeptics see signs their fortunes could be changing for the better. They point to the 37% drop for electric-car maker Tesla Motors since the beginning of October as a sign that some stocks that look expensive relative to their earnings are finally are coming back down to earth.

But other money managers who do their fair share of shorting say the market could grind higher for the next several months, amid continued low bond yields and the Federal Reserve’s pledge to keep interest rates, now near zero, low for a long time.

John Burbank, who runs Passport Capital in San Francisco, which has $3 billion under management and is up 18% this year, says U.S. stocks aren’t expensive relative to corporate and government bonds, which are in a “bubble.” He argues that U.S. companies are doing a better job allocating capital and returning cash to investors, in part because of investor pressure.

That is partly why Mr. Burbank has been wagering against emerging-market stocks, which have done poorly over the last year, rather than the broader U.S. market. Passport is buying exchange-traded funds that will do well if emerging-market companies run into trouble. The hedge fund also is shorting metals stocks, steel companies and others that could do poorly if growth in China or other emerging-market countries slows.

Mr. Burbank is shorting “old tech” stocks that could be hurt by upstart tech companies. He believes stocks like International Business Machines, Cisco Systems and Hewlett-Packard are vulnerable.

Though Passport’s overall portfolio is positioned to benefit from a continued rally in stocks, Mr. Burbank is holding on to some broader wagers on a decline. These hedges have become more inexpensive as the market has climbed, as have investments that figure to rise in value if the market’s volatility grows. He worries that banks don’t play as large a role in the markets as they once did. So if bad news hits the market, a sudden and sharp tumble could ensue.

Many bears say they aren’t throwing in their towels, adding that the market is due for a big correction when the Fed begins to scale back its easy-money policies. Many economists and analysts expect the Fed to reduce its bond-buying program next year.

For now, however, shorts aren’t having much fun, says Mr. Chanos of Kynikos, who nonetheless is trying to stick with his strategy.

“We are attempting, as always, to short stocks that will go down,” he says. “This is proving to be a bit difficult.”