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Retail trader positioning at historic extreme against SPX500

SPX News by Simon Kazinsky on 06:50 February 13, 2017 EST

According to DailyFX, a portal that tracks retail traders positioning, the ratio between long and short traders for the SPX500 CFD stands now at 9 to 91% having reached earlier today a reading of 8 to 92% during the Asian session.

This reading is really extreme. Retail traders tend to be wrong and oppose the current trend. Hence, retail positioning is seen as a good contrarian indicator. However, when the trend comes to an end it tends to be the time when retail traders are at their most extreme positioning as they accumulate losing bets. Therefore, a peak may occur when retail traders bias is so single sided.

But to start entertaining the idea that a peak may form soon on the Standard and Poors 500 chart we will have to see the index easing, retail sentiment less biased and supporting moving averages giving way. It is still way too early to make that call.