I want to ask a question of those who are trading the S&P futures. Since the audience of this blog is primarily smaller traders, I guess it would be more correct to say the mini S&P futures. I want to hear about how you’ve been trading the last couple of weeks because I have seen some really amazing actions among the smaller traders in that market.
Let me explain.
I have posted previously on the Commitment of Traders Report, which shows the positioning of the three primary types of futures market participants (Large and Small Speculators and Commercials). It’s a report I look at each week for my job.
Something really amazing showed up in the most recent data from last Tuesday. In a market where there’s been a very strong, very clear downside bias the Small Speculators as a group not only cut their shorts, they added to their longs. In September they had begun lightening up on their longs (they’ve been net long for over a year), paring back to 59% long from 68% long. Then they started building again at the end of the month, back up to 62% long as of September 30th.
As of last Tuesday, a day when the market closed basically on the day’s lows, those same Small Specs were out to 76% long as the result of nearly cutting their shorts in half and adding more than 10% in additional new longs. This blows my mind.
So here’s my question: If you were long the mini S&P at the end of the day on Tuesday of last week (10/7), why? I really want to hear the things that were justifications for being so.
I hope I get a bunch of responses here. This isn’t about embarrassing anyone. I want this to be an educational opportunity. My suspicion is there are two major reasons for being long at that point – 1) the “it can’t go any lower” justification, 2) expectation that government action would turn the market higher.
Please, though, share your thoughts with the group.