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While bullish sentiment towards the equity market has rebounded sharply since the end of August, at least one group of traders is not feeling the love, especially when it comes to technology-related shares.

Based on recent data from the Commodity Futures Trading Commission, commercial traders (i.e., defined by the CFTC as those who manage their business risks by hedging in futures and options) now have their biggest net-short position in NASDAQ-100 futures in recent memory.

As the follow chart (courtesy of SentimenTrader) shows, the “smart money’s” track record when it comes to identifying tradeable short-term trend reversals is not too shabby.

Combine that with the fact that many hedge funds have major exposure to technology darlings like Google, Microsoft, and Apple — according to Goldman Sachs, the latter is a top 10 holding of 75 funds — and one could argue that you have the makings for a nice little rout.

I guess we’ll soon find out.

Category: Psychology, Short Selling, Technical Analysis, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

8 Responses to “Smart Money Gets Massively Short NDX”

  1. mrmike23 says:

    “The more people who believe something, the more apt it is to be wrong. The person who’s right often has to stand alone.” -

  2. JesseLivermore says:

    Striking chart. But does the commercial traders’ position lead NDX or just negatively correlate with it?

  3. [...] The Big Picture, SentimentTrader Deel dit [...]

  4. Zack Gao says:

    Flipside is that they missed most of the big moves. Hopefully, this holds true once again as I am long equities.

  5. [...] The smart money is “massively” short Nasdaq futures.  (Big Picture) [...]

  6. [...] The smart money is “massively” short Nasdaq futures.  (Big Picture) [...]

  7. moctavio says:

    On the post on the smart money being short the Nasdaq you say the record is not “too shabby”. I disagree, it is actually pretty bad, when yo look at it.

    You note five red dots, only one, the one in 2005 actually was followed by a drop in the NDX, in all others, by the time the drop came, the short position had been mostly covered, thus they called it, but they fail to make any money at it.

    In 2006, by the time the Nasdaq dropped, the net position was positive.
    In 2007, there was a drop, but a quick recovery, when the big drop arrived, the position was positive again.
    At the end of 2009, by the time the drop came, they were net long again.
    Then one this year, they had covered partially, by the time

    Thus, I dont see much predictive power in this number, nobody would make money at it, yes it says there will be a drop, but it could be next week, month or next year.

    Shabby in my book