Speculator Positions on the S&P 500 Last Week
The S&P 500 is correcting
In the week ended February 9, the S&P 500 closed at 2,619.6, depreciating by 5.2%. The index, which has not dropped more than 2% in a day since 2016, has witnessed three drawdowns, of 2.1%, 4.1%, and 3.8%, in the last two weeks. Whereas some investors have blamed the fall on bond yields suddenly rising, this theory may not justify a 10% fall. The over-optimism that stretched valuations faced strong resistance and may have made investors realize that markets are not a one-way street. The reaction could have been similar if the trigger were something other than higher bond yields.
Among S&P 500 sectors, the energy sector (XLE) had the worst week, with a drop of 8.5%. It was followed by the financial (XLF) and telecom (IYZ) sectors, which fell 5.8% and 5.7%, respectively. The utilities (IDU) sector closed the week with a loss of 2.8%.
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Speculator positions on the S&P 500
According to the Commodity Futures Trading Commission’s weekly Commitment of Traders report, in the week ended February 9, large S&P 500 speculators decreased their number of net bullish positions from 38,296 contracts to 36,189 contracts. The SPDR S&P 500 Trust ETF (SPY) and the iShares Core S&P 500 ETF (IVV), which track the S&P 500, have recorded more outflow than reduced future positions, which could mean that investors have not been spooked by the fall or they have underestimated the correction.
Outlook for the S&P 500
The late pullback on February 9, before the markets closed for the week, could be seen as a positive sign for this week. Equity market bulls are likely to be tested again this week, especially after the US inflation report on Tuesday. More strong macroeconomic data, such as wage growth in the February jobs report, could prompt fears of rising interest rates and keep volatility elevated. In the next part of this series, we’ll discuss why the US dollar surged last week.