The overall Equities trader positioning chart became more extreme and honestly scary this past Friday when the new Commitments of Traders (COT) data was released. Starting three weeks ago, Commercial traders became net-short for the first since the start of 2024, but this time, the selling continued the following two weeks, where there is an obvious change in trader behavior. If Commercials are this net-short, Speculators are now net-long, since total Speculator (both Small and Large) positioning is the inverse of Commercial traders. That means Speculators are buying a dip in the stock market. The Equities CMR COT chart shown below represents total trader positioning in futures for the four major indices: Nasdaq, S&P, DOW and Russell. Does that mean all four are positioned the same? Obviously not, but it provides a consensus on how traders are positioned in Equities.
One of the four major indices does have extreme positioning and provides an opportunity for a high reward/low risk trade to the short side. I always caution traders about shorting the stock market as it is the worst trade in history for obvious reasons. It can work, but then it can become addicting trying to capture the same feeling of having a winning short trade. Best advice right now regardless if you trading the long or short side is to trade small especially shorting as short squeezes have been known to blow out accounts rather quickly. I expect there will be more volatility in the upcoming weeks with market-moving earnings this week for major companies like Meta, Tesla, Microsoft and Alphabet along with economic data being released and Fed news.
If you want to find out which index is currently crowded short and learn more about the COT, trader positioning and macro analysis please visit our website www.crowdedmarketreport.com. The services we provide are listed below, but I think it is worth highlighting that we provide industry-leading COT charts that are published on Friday before the market closes and before any other chart service out there. We also include all markets available in the COT report, complimentary TradingView indicators and our proprietary CMR COT Index which shows the level of crowdedness.
Thanks,
Jason Shapiro & The CMR Team
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