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US S&P 500– Retail CFD traders remain extremely net-short the SPX500, which tracks the fair value of the S&P E-mini futures contract, and a contrarian view of ‘crowd’ sentiment has kept us firmly bullish. Our data shows there are a remarkable 10 open positions short for every 1 long—91 percent of all open positions are short.
The clear danger is that retail traders have often been ‘right’ at major trend turnarounds, and the extraordinarily net-short positioning warns of a potential top. But such extremes by definition are only clear in hindsight.
We will remain cautiously bullish until we see substantive evidence of a sentiment reversal.
See next currency section: EURUSD - Euro Forecast to Strengthen Further versus US Dollar
--- Written by David Rodriguez, Senior Strategist for DailyFX.com
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