S&P 500 May Continue Downtrend Based on Sentiment

US 500: Retail trader data shows 42.1% of traders are net-long with the ratio of traders short to long at 1.38 to 1. In fact, traders have remained net-short since Feb 13 when US 500 traded near 2589.89; price has moved 4.7% higher since then. The number of traders net-long is 7.8% higher than yesterday and 12.4% higher from last week, while the number of traders net-short is 0.6% higher than yesterday and 8.4% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests US 500 prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current US 500 price trend may soon reverse lower despite the fact traders remain net-short.

— Written by Dylan Jusino, DailyFX Research