New York (HedgeCo.net) – Normally we focus on the large speculator group when we look at the commitment of traders (COT) reports, but the recent activity by small speculators in the S&P futures COT report caught our attention. In just over a month, the group has gone from a net short position under 20,000 contracts to a net short position approaching 100,000 contracts.

Friday’s COT report showed the group holds 29,931 contracts long and 124,674 contracts short for a net of 94,743 contracts held short. Looking at data as far back as 2006, the small speculator group has never been anywhere near this bearish as a whole. The most contracts held net short in almost ten years was just over 35,000 contracts in June 2012. From a contrarian perspective, this could be good news for the market as June 2012 saw a two-month long correction come to an end and the market rose for the next four months.

With the small speculator group being so bearish, the commercial hedgers have been forced into a similar long position and the group is net long just over 80,000 contracts. The last time the commercial hedgers were long more than 75,000 contracts was in September 2011. That time period also marked a two-month down swing in the market as August and September of that year saw the S&P lose over 5% in consecutive months.

Rick Pendergraft
Research Analyst
HedgeCoVest