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US SP 500– Retail CFD traders remain extremely net-short the SPX500, which tracks the fair value of the SP E-mini futures contract, and a contrarian view of ‘crowd’ sentiment has kept us firmly bullish. It was as recently as last week when our data showed over 90 percent of open SPX500 positions were short—a fresh record.
Such heavily one-sided sentiment can sometimes warn of an extreme and potential price reversal. Yet it is likewise clear that sentiment can remain extreme for extended periods of time, and a major trend turnaround is only clear in hindsight.
We would need to see a substantial turn in retail CFD trader sentiment in order to call for an SP 500 reversal, and indeed we will remain bullish until further notice.
See next currency section: EURUSD – Euro Forecast to Gain Unless this Changes
— Written by David Rodriguez, Senior Strategist for DailyFX.com
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