Hedge Funds Bought 29.2B$ of S&P 500 into Elections

This week's Commitment of Traders (COT) report indicates that hedge funds have significantly shifted their positioning, now holding near the lowest short exposure to the S&P 500 in the past twelve months, sitting at the 94th percentile. This change comes with the addition of 97,350 net long contracts, equivalent to approximately $29.3 billion.

Retail investors and asset managers remain notably bullish as well, positioned at the 90th and 82nd percentiles, respectively. This collective optimism is reflected in the S&P 500's breakthrough to new all-time highs, surpassing the key 6,000 level.

Asset Managers:

This week, asset managers made their largest position decrease in the S&P 500, shedding 52,437 contracts, which equates to approximately $15.7 billion. This marks the second consecutive week in which they have reduced their exposure to the S&P 500.

asset managers added the most to their US 2-year Treasury positions, increasing their holdings by 41,664 contracts, which amounts to approximately $8.3 billion. This continues to be their top position. As depicted in the chart above, Treasuries have been depreciating as yields rise, a trend that has persisted since the Federal Reserve's recent 0.5% interest rate cut.

Retail Investors:

Retail investors' most significant position increase this week was in the EURAUD currency pair, with an addition of 11,620 contracts. Despite this, sentiment around this pair remains very pessimistic, as hedge funds and asset managers hold percentile positioning of only 3.85% and 5.77%, respectively. This raises the question: are retail investors positioning for a potential bullish reversal?

On the other hand, the largest position decrease by retail investors this week was in the AUDJPY pair, where they sold 10,458 contracts. As shown in the chart above, the pair has been trending upward over the past quarter. Retail investors, along with asset managers, remain net long, while hedge funds hold net short positions. With the market anticipating that the Reserve Bank of Australia will maintain high interest rates, AUDJPY remains an active carry trade for the time being.

Hedge Funds:

As mentioned earlier, hedge funds' largest position increase this week was in the S&P 500, while their most significant decrease was in VIX futures, where they sold 17,131 contracts, amounting to approximately $3.6 billion. These strategic changes proved to be highly profitable, with the S&P 500 rising by 4.72% and, as depicted in the chart above, the VIX declining by 33.67%.

Full Report:

Download the full report below. In the report you will find investor positioning insights for major equity indices, commodities such as gold, oil, gas, and silver and forex pairs.

Disclaimer:

Past performance does not guarantee future results, which may vary. The economic and market forecasts presented herein are for informational purposes as of the date of this presentation. There can be no assurance that the forecasts will be achieved. Copyright Alpha Rho Technologies LLC. All rights reserved.