SPX500 –The SPX500 continues to hit record-highs with such frequency to become boring, but it’s this sense of complacency that warns we’re much closer to a top than most think. Our retail CFD trader sample confirms that the risk of pullback is substantial.
Trade Implications – Total short interest in the SPX500 contract remain near record-highs as there are far too many retail traders trying to catch THE top. Yet it’s far more interesting to note what’s going on with the other side of the trade: the number of open orderslong surged by over 50 percent in the past week.
The fact that retail crowds are suddenly interested in joining this rally is a clear warning sign. The SPX500 is likewise at its greatest distance above its 200-day SMA since March, 2012 peaks, while the S&P 500 rally is at its most consistent since the same high.
It’s been a fool’s errand to try and catch THE top, and our proprietary SSI data shows that many have failed miserably in doing so. But even a broken clock shows the correct time twice a day, and we can’t ignore warning signs.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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