Monday, April 13, 2020

Futures Traders Ain't Buying It

Last week I featured the now net short interest among futures traders who speculate on the S&P 500 Index, along with short interest on SPY and in the NYSE.

The NYSE data only comes to us monthly, we get the SPY data every couple of weeks and the futures commitment of traders report every Friday (for positions as of the previous Tuesday).

Last week I explained how no small amount of the oomph of the latest rally likely came from shorts having to cover their positions before potentially killing their portfolios (shorts lose big time when the stuff they shorted rises). 

Well, no doubt -- based on the previous week's numbers -- there was some serious short covering last week (virtually had to be), but come a week later, futures traders were back in on the short-side, and a bunch -- a whole bunch!

Now, again, that second, and huge, down bar was as of last Tuesday, certainly some of that new short interest could've been covered during the rally thereafter. This week's data will be interesting.

Got the update for SPY (S&P 500 tracking ETF), and, same thing, investors with, let's hope for their sake, sufficient knowledge and sophistication to go short are clearly betting that general conditions will ultimately prevail over Fed pumping:

Of course this potentially sets the stage for more violent upside spikes on any positive headlines.

By the way, the majority of the other asset classes we track in this manner -- commodities, precious metals, industrial metals, currencies, commodity-dependent currencies, etc. -- presently reflect a high level of bearishness over the state of the global economy.

Note: The top graph represents net positioning, in terms of number of contracts, among futures traders; a declining bar represents the number of short positions over longs. The second graph represents the actual number of shares of SPY that have been shorted; a rising line represents rising short interest. I.e., they both say the same thing; a lot of traders are betting on a decline from here...

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