In the last two weeks we have pointed out that not only are equity futures traders the most net long in six years but NYSE Margin Debt [8] is also near four year highs. Add to this the fact that VIX futures are the most net short they have ever been [9] - crushed by an all too visible hand - and it appears that equity market participants were critically unafraid of the fiscal cliff uncertainty. What is even more concerning, at least for those who care to be modestly contrarian that is, is that the market appears to be running out of greater fools in every asset class as JPMorgan's speculative position indicator - which combines net positioning across 8 'risky' and 7'safe' assets - is at its most risk-on since just before the crash began in Q3 2007. So, for all those taking heads who expect a flood of new money, who still believe there is money on the sidelines that wants to be put to work, the fact is in the last decade we have been more speculatively positioned long only once - and that marked the top in stocks (and risk-assets everywhere).
[10]
The risky assets are: Copper, GSCI, AUD, NZD, CAD, RUB, MXN and equities (an aggregate of the S&P500, Dow Jones, NASDAQ & Nikkei).
The safe assets are: Gold, VIX, JPY, CHF, Silver, an aggregate of the UST and Eurodollar futures & an aggregate USD index. The USD series is the inverse of the sum of positions in EUR, JPY, GBP, CHF, AUD, NZD, CAD, RUB and MXN futures. The UST series is a duration weighted aggregate of the Eurodollar, UST2YR, UST5YR, UST10YR, UST long bond & the UST Ultra long bond futures.
Source: JPMorgan