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S&P 500’s Sharp Declines Warn of Further Downside

By , Quantitative Strategist
06 February 2014 15:45 GMT
ssi_SPX500_body_Picture_21.png, S&P 500’s Sharp Declines Warn of Further Downside

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SPX500 –Retail CFD speculators have bought aggressively into SPX500 weakness, and a contrarian view of crowd sentiment suggests stocks could indeed continue lower.

Trade Implications SPX500 – The SPX500 tracks the fair value of the S&P 500 futures price, and a look at the chart above shows that traders had remained consistently net-short the contract since it traded near 1400.

Total long interest nearly tripled as the SPX500 traded from 1840 to 1750 in under a month. Sentiment and price extremes (tops/bottoms) are only clear in hindsight, but the substantial shift in sentiment suggests that stocks could have set a lasting short-term top.

--- Written by David Rodriguez, Quantitative Strategist for

ssi_SPX500_body_Picture_22.png, S&P 500’s Sharp Declines Warn of Further Downside

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06 February 2014 15:45 GMT