CMR Chart of the Week - Russell
Large Speculators Caught Max Short
Over the last few weeks, we highlighted positioning in the Russell and how the market top was not in, where there will be breadth expansion, benefiting the Russell. This was the first time all year where we believed the breadth expansion argument would work, after market sentiment became very bearish due to the lack of market participation in the rally and the COT finally showing capitulation by Speculators in Russell.
Here is an excerpt from the Crowded Market Report on 6/30/2024:
Large Speculators doubled down on shorting the Russell as “breadth bears” continued the argument that the market rally is not sustainable with limited participation from the overall market. As you can see from the first chart, they were at extreme levels going into the PCI number last Thursday. At which point they were squeezed out all day Thursday, Friday and continuing today, which is clearly shown in the second chart.
The COT is a great risk management tool, where at a minimum, traders should have stayed away from being short the Russell due to low reward/high risk.
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Thanks,
Jason Shapiro & The CMR Team
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