Net positions for the S&P 500 in the United States dropped from -$163.9K to -$1,474K, according to a recent report. This decline shows a shift in how investors feel about S&P 500 futures. The US Dollar is gaining strength, which is affecting different currency pairs. For example, EUR/USD has seen some downward pressure, while GBP/USD decreased due to weaker UK economic data, hitting lows near 1.3360.

Gold Trading and Federal Reserve Impact

Gold is trading around $4,300 per troy ounce but is losing some momentum. Nevertheless, many in the market expect further rate cuts from the Federal Reserve next year, which could affect gold prices. Litecoin is currently above $80 after bouncing back from a resistance level of $87 earlier this week. However, it faces risks related to a possible long squeeze. The S&P 500’s rise was encouraged by a Federal Reserve rate cut viewed as dovish, but the US 2-year yield remains around 3.50%. Non-tech stocks have particularly benefited from this rate cut. There has been a dramatic change in S&P 500 futures positions, with speculative net short contracts soaring from about -164,000 to over -1.47 million. This is one of the most significant bearish actions seen in years from hedge funds and large speculators, indicating strong confidence that a market downturn is near.

VIX and Global Economic Concerns

This shift into bearish territory is reflected in the options market, where the CBOE Volatility Index (VIX) has been rising steadily. In the first two weeks of December 2025, the VIX surpassed the 20 level, a crucial point that shows growing anxiety among traders and higher costs for portfolio insurance. This level was last seen during market uncertainties in the second quarter of this year. This sentiment is not isolated; the latest Nonfarm Payrolls report for November 2025 revealed a slowdown in hiring, coming in below expectations at 155,000. This heightens worries about a global slowdown, especially as the UK’s economy reported a second consecutive month of contraction last month. Poor economic data gives bears more reasons to strengthen their positions. Despite the Federal Reserve’s recent rate cut, many in the market doubt it will avert a downturn, feeling it is insufficient. With Chairman Powell’s term ending in 2026, discussions around possible replacements add another layer of uncertainty to policy for the coming year. This makes the Fed’s forward guidance less dependable for investors. Against this backdrop, traders are increasingly focusing on protective strategies as we head into the end of the year and into the first quarter of 2026. They are buying put options on major indices like the SPX and NDX to protect against possible declines. Additionally, using VIX futures or options to hedge against rising volatility is becoming more common. The last time we saw such a rapid increase in net short positions was before the significant market downturn in late 2018. While history doesn’t repeat exactly, this extreme positioning suggests a higher risk of a sharp market decline in the coming weeks. The market is prepared for bad news, meaning any further negative developments could have a significant impact. Create your live VT Markets account and start trading now.

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