CoT: Looking Into The Future Thru Futures, Hedge Fund Buying

As January came to an end, the tech-heavy index landed right on a rising trend line from last March, and bulls were not in a mood to let that go that easily. From their perspective, supports continue to attract bids, including Wednesday this week when short-term support at 13560s was defended, a loss of which could hasten a move toward the 50-day at 12979.91.

Russell 2000 mini-index: Currently net short 8.4k, up 10.3k.

On both Wednesday and Thursday, the Russell 2000 was repelled at the upper bound of a rising channel from late October-early November. Earlier on January 29, which was the month’s last trading session, the small cap index landed right on the bottom end of the channel, which was vigorously defended (more on this here).

This is an opportunity for small-cap bears to push the Russell 2000 (2289.36) toward the lower end of the channel, which lies at 2150s and which also lines up with one-month straight-line support.

US Dollar Index: Currently net short 13.9k, down 955.

Last Friday’s intraday high of 91.61 is all dollar bulls could do to test broken-support-turned-resistance at 92, which has proven to be an important level going back to at least June 2003. This level was lost toward the end of last November.

After last week’s failed test of 92, bears showed up this week. A loss of 90 opens the door to a test of 88-89, which goes back to at least March 2004. Earlier on January 6, the index (90.47) bottomed at 89.17.

VIX: Currently net short 138.3k, up 21.8k.

VIX (19.97) is clinging on to 20 and is on the verge of a breakdown (more on this here). This is an opportunity for volatility bears to push the index toward mid- to high-teens. Non-commercials are positioned accordingly, having built net shorts in VIX futures to a one-year high. Near-term notwithstanding, it is worth pointing out that VIX tends to peak after these traders are either net long or have substantially cut back their net shorts (arrows in the chart).

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