US CFTC data shows net positions in S&P 500 NC moved higher than the prior reading.
The net position rose to $-42.5K from $-80.9K in the previous report.
Large Speculator Positioning Shifts
We are seeing a significant shift in sentiment from large speculators in the S&P 500 futures market. Their net short position has been nearly cut in half, moving from -80.9K to -42.5K contracts. This indicates that major funds are rapidly closing out their bets that the market will fall.
This change likely comes on the heels of the encouraging March 2026 inflation report, which showed core CPI dropping to an 18-month low of 2.8%. This positive data reinforces the Federal Reserve’s recent commentary suggesting the tightening cycle that defined 2025 is firmly behind us. The market is now pricing in a greater than 70% chance of a rate cut by the fourth quarter.
We can look back to the market environment of late 2022 for a historical comparison. Back then, speculators were also heavily short before a similar reduction in bearish bets preceded the strong market rally throughout 2023. That pattern of “short covering” often provides the initial fuel for a sustained move higher.
For derivative traders, this suggests it is time to reduce outright bearish positions, such as long puts. The cost of downside protection is likely to decrease as implied volatility falls, which we’ve already seen with the VIX dropping below 15 for the first time this year. This environment makes selling options, like cash-secured puts on strong companies, a more attractive strategy.
This is not a signal to become aggressively long, but rather to shift from a defensive to a cautiously optimistic stance.
Potential Trading Approaches Ahead
Traders could consider using strategies like buying call spreads to participate in a potential grind higher while defining their risk. The sharp decrease in speculative shorts suggests the path of least resistance for stocks has shifted to the upside for the coming weeks.
