July 8, 2020
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This sale could be the beginning of a larger recession, says long-time market strategist Sam Stovall

Some investors make the biggest bet against the stock market in nine years

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A woman walks in the rain near the New York Stock Exchange (NYSE) in the financial district of Lower Manhattan during an outbreak of coronavirus disease (COVID-19) in New York, April 13, 2020.

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Andrew Kelly | Reuters

Investors are making the biggest bet on the futures market since 2011, which the stock market is about to sell off.

Since April, the E-mini S & P 500 has been a net short position in the futures market.

Some strategists believe that when many investors take the same position, a herd mentality appears at work, and investors actually send the opposite signal. In this case, it will be positive for stock market growth. But Peter Bukvar, chief investment strategist at the Bleakley Advisory Group, does not agree that stock futures investors are necessarily the opposite.

According to CFTC, as of last week, the net short position consisted of 303,000 S & P E-minis futures held by non-profit traders, an investment group considered as speculators. In early March, the same investors held a net positive position, peaking at about 55,000 contracts.

According to Boockvar, twice as many futures contracts were shorter than the weekly one for the week ending Tuesday. He points to cases where the shorts were correct, as in September 2007, when they were at a record high, ahead of the market peak in October.

He said that in March 2009 there were record high longs, another deal that turned out to be correct, as the long bull market began this month.

“They were right. I am skeptical of this as the opposite indicator. I’m going to prove that sometimes the shorts are right, ”he said.

Boockvar said that he really does not know what to do with positioning. It is more accurate in the case of commodity futures, such as corn or oil, where the producer is on the other side of the trade.

“CFTC data should be seen as the opposite indicator, but I do not believe that this is with the S & P 500 futures. You can have long stocks of people and hedging futures. This does not mean that they are clean short, ”he said. ,

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