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US S&P 500– Retail CFD traders continue to hold a near-record short position in the SPX500, which tracks the fair value of S&P 500 futures prices. A purely contrarian view of crowd sentiment points to further stock market gains.
But we will repeat what we said last week—such heavily one-sided sentiment often coincides with significant price extremes and reversals. The difficulty is that such reversals are by definition only clear in hindsight, and we would need to see a marked shift in retail positions to confirm any such moves. Until that happens we see little choice but to cautiously favor further strength.
See next currency section: EURUSD - What do we Need to see for a Euro Breakout?
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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