US CFTC data shows S&P 500 NC net positions rose to -110.1K.<\/p>\n
The prior reading was -115.8K.<\/p>\n
We are seeing that large speculators are reducing their bets against the S&P 500. This means the bearish sentiment that has dominated the market is starting to ease. This is not yet a bullish signal, but it is a clear sign that conviction on the short side is fading.<\/p>\n
This shift in positioning comes as recent economic data for March 2026 showed core inflation moderating to a 3.2% annual rate, easing fears of more aggressive central bank action. We’ve seen Treasury yields pull back from their recent highs in response, with the 10-year note now trading below 4.5%. This provides some relief for equity valuations which were under pressure throughout the first quarter.<\/p>\n
As we are in the middle of Q1 2026 earnings season, results are coming in better than initially feared, particularly from large-cap technology firms. With nearly 60% of S&P 500 companies having reported, the blended earnings growth rate is tracking at a positive 3.5%, beating expectations. Strong corporate performance provides a fundamental reason for traders to close out their short positions.<\/p>\n
From a derivatives perspective, this may put downward pressure on implied volatility. We’ve watched the VIX index fall from above 20 in March to around 17.5 recently, making long-volatility positions less attractive. Traders might consider selling out-of-the-money puts on market dips to collect premium, capitalizing on this potential stability.<\/p>\n
Looking back, we saw a similar dynamic in the second quarter of 2023 when speculative net shorts were covered as recession fears abated, which preceded a strong market rally into the summer. Therefore, we should monitor if this trend of shrinking short positions continues in the coming weeks. <\/p>\n
A move toward a flat or net long position would be a much stronger signal that a durable market bottom may be forming.<\/p>\n
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