New data released late Friday from the Commodity Futures Trading Commission indicate that large speculators in S&P 500 E-Mini contracts boosted their collective net short position by about 33,000 contracts in the week ended Oct. 23, maintaining a short position that, while significantly smaller than the peak, is still large by historical standards.
This means that the short base is still large enough to provide support to stock prices. The peak short was 409,000 in the week ended Sept. 11, which was the starting point of a significant rise in share prices. The rally squeezed the short base, bringing the collective net short down to 151,000 two weeks later.
Since that time, specs have been rebuilding their shorts, with the collective position now standing at 221,000. This is still a large position by historical standards, given that specs had on average held a collective net short of 39,000 contracts in the five years ending in January. The peak short before this year was 267,000 set in May 2006.
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Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market,
first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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