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Smart Money Gets Massively Short NDX

Posted By Michael Panzner On October 4, 2010 @ 2:22 pm In Psychology,Short Selling,Technical Analysis,Think Tank | Comments Disabled

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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 [2]) 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 [3], 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.


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URL to article: http://www.ritholtz.com/blog/2010/10/smart-money-gets-massively-short-ndx/

URLs in this post:

[1] Image: http://www.ritholtz.com/blog/wp-content/uploads/2010/10/sentiment-001.gif

[2] SentimenTrader: http://www.sentimentrader.com/

[3] Goldman Sachs: http://www.marketfolly.com/2010/09/goldman-sachs-vip-list-hedge-fund-trend.html

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