We noted yesterday that NYSE short-interest dropped to a five-month low [2] removing much of the kindling for a centrally-planned world of goal-seek'd equity wealth creation. So when we hear that sentiment is so bad, and everyone's bearish - the simple fact is: they are not. To wit, the S&P 500 e-mini futures contract - the most liquid equity trading vehicle in the world - has pushed to its most net-long position since December 2008. The last time equity traders were this net-long, the S&P fell 22% in the next 11 days. The psychology may be different - from "surely it can't drop any more" to the current "it can't drop much because Bernanke/Draghi has our back" - but the positioning is just as complacent this time.
S&P 500 e-mini futures net long (lower pane) positioning +12% is the most-long since Dec 08... The same kind of overly complacent-driven move would take the S&P down to 1110.
[3]
Critically the evidence is clear for how we rallied so hard off the Q4 2011 drop last year as the massive net short position was prime for squeezing... not now though.
and macro hedgies are as long equities as they have been in two years...
[4]
and its not just equities and futures, credit markets are the most long credit they have been since 2008...
[5]
Chart: Bloomberg