We consistently follow BAML’s hedge fund monitor and for the past several months hedge funds have maintained long exposure below 30 percent. However in the first week of March, Equity Long/Short Hedge funds finally took up their net long exposure to benchmark levels of 35-40 percent according to BAML’s weekly analysis of CFTC positions. Hedge funds increased net long exposure from 33 percent to 35 percent, the highest long exposure in at least eight months, when readings remained below historic averages. This new development ties into our previous report on how hedge funds ended 2012 on a bullish note. The optimism has spilled over into the new year as Long/short hedge funds have consistently packed up on their long positions in US.

Equity Long Short Market Exposure

Across strategies the much watched Gold continues on its selling streak, according to data from CFTC. Except for Palladium, most of the metals remain pressured, where hedge funds are in the crowded short zone of copper whereas Platinum and Silver were sold across the board in the first week of March.

Among currencies, large speculators added to their shorts in Euro, up from $1.2 billion to $3.4 billion notional last week, this marks a 183 percent rise in short positions. This indicates a pessimistic view on the prospects of the hung parliament which came to being as the result of Feb 24 elections in Italy. If political tensions intensify in Italy, short holdings in euro will multiply much further. The US dollar meanwhile mirrors the movement of euro, where large specs increased long exposure . At the same time, hedge funds also increased short exposure in Japanese yen,  up from$8.9 billion  to $9.8 billion.

Hedge Fund Euro Shorts

Across equities, large specs have been buying into S&P 500, Russell 2000 and NASDAQ-100 (INDEXNASDAQ:NDX), readings in S&P 500 (INDEXSP:.INX) moved into the crowded long zone. In agriculture commodities, wheat stays in the crowded short zone. Crude oil and natural gas are also steady in the crowded long whereas 10 yr treasuries moved out of crowded long zone.