Why Speculators Increased Their Bullish Bets on the S&P 500

A new high for the S&P 500

The S&P 500 (SPY) index closed last week at 2,459.27, posting a weekly gain of 1.4%. The S&P 500 Index registered a fresh high of 2,463.54 during the week as the Fed hinted at delays in policy normalization plans. The initial reaction to a weak retail sales report was negative for the index, but better-than-expected earnings from Wells Fargo (WFC) and Citibank (C) boosted the index. Though the volumes were low because of summer months, expected delays in tightening from the Fed and positive earnings pushed the index to a fresh high.

Why Speculators Increased Their Bullish Bets on the S&P 500

6th straight weekly increase in bullish bets

Large speculators and traders have increased their net positions in the S&P 500 (IVV) index futures, according to the data released by the Commodity Futures Trading Commission (or CFTC). The total net positions stood at 2,627 contracts as of July 11, an increase of 348 contracts from the previous week. This is the sixth weekly gain in bullish positions for the S&P 500 Index and the highest bullish level since the last week of April 2017. With Fed rate increases possibly being on hold, we can expect further gains if earnings continue to beat expectations.

Week ahead for the S&P 500

Second quarter earnings will be in focus this week with releases from companies like Blackrock, Goldman Sachs (GS), Bank of America (BAC), IBM, Lockheed Martin, J&J, Novartis, Harley-Davidson, Microsoft, Visa, Sap, Unilever, Wipro Honeywell, and Colgate-Palmolive. Macroeconomic data will likely play a minor role in the week, as corporate earnings are expected to drive US markets. Positive earnings will likely drive the S&P 500 to a new high this week.

In the next part of this series, we’ll analyze how the US dollar reacted to Yellen’s cautious tone.