US CFTC data shows S&P 500 NC net positions rose to -105.1K. The previous reading was -132.9K.
The latest figure is less negative than before. This indicates a move closer to zero in net positioning.
Speculative Positioning Shifts
We are seeing a significant shift in speculative positioning, as large traders are reducing their bets that the S&P 500 will fall. This change from a net short of $-132.9K contracts to $-105.1K shows that conviction in the downside is weakening. This is the largest weekly reduction in short positions we have seen since the fourth quarter of 2025.
This development follows the market turbulence we experienced late last year, which was driven by fears of sticky inflation. However, recent government data released last week showed the January Consumer Price Index cooled to 2.9%, the first reading below the 3% threshold in over eighteen months. This positive surprise is likely forcing traders who were positioned for bad news to reconsider and buy back their shorts.
The current situation is creating the potential for a short-covering rally in the weeks ahead. With so many traders still positioned for a decline, any further good news on the economic front could force more buying and propel the market higher. We should be cautious about initiating new bearish positions until this momentum subsides.
We observed a similar dynamic back in late 2022, when extreme bearish sentiment among speculators preceded a major market rally throughout 2023. Historically, when sentiment becomes this one-sided and begins to reverse, the subsequent move can be sharp and sustained. The current reduction in shorts suggests we may be at a similar inflection point now in early 2026.
