Something to think about before rushing to buy "bullish breakouts."
From the CONTRARY INVESTOR.
The Write Side Of The Trade...An interesting development is occurring. We sincerely thank our friends at Ned Davis research for explicitly
pointing it out. The development is the sentiment of the "smart money" versus that of the public and speculators at large. As you may know,
there are a good number of large commercial traders in the S&P 500 index futures market. For them, this isn't some game or dream of
retirement riches. It is a day to day livelihood. It's much more than serious business. These are pro's who are experienced, know the market
well, know what the money flows are and where they are coming from, and are anything but gamblers. These firms take very large positions in
both the S&P futures and cash markets. By many, these are considered "smart money". Based on history, for good reason. According to the
latest data put out by the CFTC, the commercials have a record net short position in the S&P futures. At the same time, what are considered
the public and the speculators have a record net long position. We're going to find out who's right and who's wrong before long. Significant
divergence in sentiment between the commercials and the speculators/public is not something that happens everyday. In fact, these
occurrences have happened in 1998, 1991, 1987 and 1986 prior to market weakness. Interesting, don't you agree? |
