On April 12, according to the Wall Street Journal, traders are increasingly convinced that the U.S. stock market is headed for a decline.
But history suggests the opposite is more likely, according to an analysis by one macro strategist.
Non-commercial traders’ net short bets on E-mini S&P 500 futures rose to 321,459 contracts as of April 4, the most since October 2011, according to the latest report from the Commodity Futures Trading Commission (CFTC). level.
Brent Donnelly, global macro strategist at Spectra Markets, said that over the past 25 years, the size of excessive short futures positions has often been a contrarian indicator.
There have been six periods since 2000 when positioning in the futures clearly signaled a downturn, but in four of those periods, the signal turned out to be a bullish indicator of higher stocks six months to a year later.
“My sense is that maybe this time it’s going to be different,” Donnelly said.