Sunday, May 17, 2020

A Bit Less 'Positioning' Advantage for the Bulls

I've stressed aplenty the past few weeks how high short interest in the market can essentially serve to support stock prices. I.e., when traders are concentrated on the bear side of the boat, particularly while wearing no life jackets (shorting is risky business), the slightest tilting toward the water on the bear side -- i.e., a rally lifting the bull's side -- will have the bears scampering toward at least the center of the boat for safety (ie., buying to cover their short positions).

Well, while futures traders who dabble in S&P 500 contracts are showing real bearish conviction (still way net short), the two other measures that we feature in our financial markets index actually show waning confidence among the bears.

SPX futures net positioning:

SPY short interest:

NYSE short interest:

So what's it mean? On net, there's a little less weight on the bear side of the boat (a little more on the bulls), which, ironically, reduces a bit the short-term positioning advantage the bulls have been enjoying of late... 

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