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Speculators Held Highest Net Long S&P Futures

Today's dramatic 1000 point reversal of Dow 30 may be just the capitulation point that market has been looking for in this free fall market. Many other sentiment indicators, such as AAII bull and bear readings, VIX and 52 week high/low also point to the extremes. Underneath this gloomy and Armageddon scenario, one of most significant and interesting piece of data is in the futures market, specifically speculator's reading in this scary market. According to today's data release from CFTC, it looks that speculators have positioned for market (S&P500) turnaround. As this past Tuesday, speculators have built more than 102,000 long S&P500 positions, a highest in last five years. More importantly, the speculators also have reduced the bearish bet, short positions to just about 43,000, a lowest level in two years. Without questions, in the last few weeks, the equity market was the darkest period for the long side, but the end may be in sight at least in the short term. The largest net long positions of S&P500 futures contracts, about 59,000 provides some good news for long the market or warning signs ig you are short market in the near term (please refer the Bloomberg chart).

If there is anything positive over the weekend from G-7 financial rescue efforts in Washington, we should not be surprised by the huge rebound in equity market from the extreme oversold conditions.

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