Below we show our analysis of speculator positioning in S&P 500 futures. The data is released weekly by the CFTC in its Commitment of Traders report. The data is current as of the previous Tuesday; therefore today’s data was current as of Tuesday, October 20. To analyze the data, we like to look at the net positioning of Asset Manager and Leveraged Fund (typically hedge funds) categories. We take total longs for each category, subtract total shorts, then divide the net figure by the outstanding number of contracts (open interest). This gives us an idea of how offside investors may be, while scaling for the size of the market. If the last few weeks in the stock market have felt like a massive chase, you’re not alone. The CFTC data helps show why. Asset managers were their most net short the S&P 500 futures on record in the weeks following the swift crash in August. Since then, however, shorts have been forced to cover. You’ll note in the chart below that hedge funds are quite short S&P 500 futures as well, relative to their historical trend. Therefore there are two large bodies of the investment community in the process of buying back shorts they established in a panic a couple of months ago. That helps explain a large chunk of the current market rally, in our view.
We send out charts like these for every major financial and commodity future traded on US futures exchanges each Friday night in The Closer. If you’re interested in regular access to similar positioning data, try out a free trial of Bespoke Institutional!