Market Extra: Bets against U.S. stocks swell to highest level since 2011. History shows that’s actually good news for markets.

by | Apr 11, 2023 | Stock Market

Traders are growing increasingly confident that U.S. stocks are headed for a selloff. But history shows the opposite is more likely, according to an analysis by one macro strategist. Speculative traders are more bearish than at any time in the last decade, according to the latest release from the Commodity Futures Trading Commmission’s weekly commitment of traders report, which tracks futures-market positioning in a number of currencies, commodities and U.S. equity indexes.

Net-short bets by noncommercial traders in S&P 500 e-mini futures have swelled to 321,459 contracts as of April 4, the largest level since October 2011. Futures-market positioning is generally viewed as a counter-indicator by equity strategists, meaning the market often does the opposite of what futures traders expect, especially when positioning becomes notably crowded in one direction or the other. Of course, the past is no guarantee of future performance. Over the last 25 years, outsize short positioning in futures has typically served as a counter-indicator, according to Brent Donnelly, a global macro strategist at Spectra Markets. Donnelly highlighted six periods since 2000 where positioning in the e-minis became notably stretched to the downside. Durin …

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