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Hedge funds seem convinced that stock market is going through a lull period or at least that is what the level of negative bets on S&P 500′s volatility index shows.

Societe Generale’s Hedge Fund Watch notes that hedge funds have bet a large number of shorts on VOLATILITY S&P 500 (INDEXSP:.INX) futures. The total number of short contracts were up to 104,000 contracts, just below the December 2012 peak. This seems a very crowded bet considering the fact that markets are expected to once again slip into turmoil as Fed’s mid-September meeting takes place. After the recent lull in VIX, the index is once again looking up and has gone above to 13.5% now.

At the same time, longs in S&P 500 (INDEXSP:.INX) are running high, showing an increased bullish outlook as Fed’s meeting draws nearer. A number of analysts and hedge fund managers have opined that the Fed’s upcoming meeting will be the starting point of the fateful Taper.

Meanwhile hedge funds have been net sellers of all U.S. treasury notes in the past weeks, following a negative trend through both short term and long term bond holdings.

In currencies, hedge funds are betting against GBP, AUD and JPY. Hedge funds remain large net buyers of USD against GBP and JPY. Total short contracts in GBP futures are upto 64,265 compared to 21,627 long contracts. Shorts in AUD futures are also high but have scaled back from their peak, now at 91,926 contracts against 41,470 longs.

Hedge funds stances on metals and agriculture

Hedge funds are positioned in the net short zone in copper, while they remain bullish on platinum. The overall trend in gold and silver is still toward buying but it has remained on the edge for some time now. In case of agriculture, hedgers seem to have taken the most bearish positions in history. According to the last report of CFTC till August 6, hedge funds had a net short outlook in 13 commodities, Agrimoney notes. Selling across all major food commodities has remained up in the past weeks, the trend has been particularly visible in soybean and corn.

Stock Data

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