US CFTC data shows S&P 500 NC net positions rose to -110.1K.
The prior reading was -115.8K.
Speculative Shorts Are Being Reduced
We are seeing that large speculators are reducing their bets against the S&P 500. This means the bearish sentiment that has dominated the market is starting to ease. This is not yet a bullish signal, but it is a clear sign that conviction on the short side is fading.
This shift in positioning comes as recent economic data for March 2026 showed core inflation moderating to a 3.2% annual rate, easing fears of more aggressive central bank action. We’ve seen Treasury yields pull back from their recent highs in response, with the 10-year note now trading below 4.5%. This provides some relief for equity valuations which were under pressure throughout the first quarter.
As we are in the middle of Q1 2026 earnings season, results are coming in better than initially feared, particularly from large-cap technology firms. With nearly 60% of S&P 500 companies having reported, the blended earnings growth rate is tracking at a positive 3.5%, beating expectations. Strong corporate performance provides a fundamental reason for traders to close out their short positions.
From a derivatives perspective, this may put downward pressure on implied volatility. We’ve watched the VIX index fall from above 20 in March to around 17.5 recently, making long-volatility positions less attractive. Traders might consider selling out-of-the-money puts on market dips to collect premium, capitalizing on this potential stability.
Looking back, we saw a similar dynamic in the second quarter of 2023 when speculative net shorts were covered as recession fears abated, which preceded a strong market rally into the summer. Therefore, we should monitor if this trend of shrinking short positions continues in the coming weeks.
What To Watch Next
A move toward a flat or net long position would be a much stronger signal that a durable market bottom may be forming.
