Hedge fund long positions in the NASDAQ are nearly the biggest they’ve been in a year, and funds are becoming increasingly long on crude oil, according to Bank of America Merrill Lynch, which released its latest Hedge Fund Monitor report today. The firm also found that funds hold their biggest net long position in two-year Treasuries since March 2013.

Short covering in the Russell, long on the NASDAQ

Analysts Ankur Singh, Jue Xiong and MacNeil Curry report that this past week, hedge funds were very active across all the major asset classes. They cited data from the CFTC. In equities, funds purchased Russell 2000 shorts to cover their positions, as Russell shorts have declined in four of the last five weeks.

They also report that long positions in the NASDAQ increased to what is now the biggest in a year. The analysts say technical data and MAA suggest these patterns will continue for now. Macro funds in particular increased their long exposure to the NASDAQ and also to the S&P 500. (All charts/ graphs in this article are courtesy BAML.)

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Falling gold, buying copper and crude

In metals, BAML picked up on falling sales of gold contracts, which cut net long positions after three solid weeks of strong buying. The firm’s analysts also saw big sales of copper contracts as hedge funds increased their net short positions after a full seven weeks in a row of buying them. The technical side of metals is bullish, and the analysts say MAA also indicates that buying in this asset class will pick back up.

In energy, hedge funds bought contracts on crude for the third week in a row, thus increasing their net longs in the asset. BAML said this is the longest buying stretch for crude oil since the great selloff of oil started last June. Also, they say positioning “remains stretched to the downside,” and they believe buying in this area will continue as well.

Action on MXN, GBP, two-year Treasuries

On foreign exchange, speculators purchased MXN contracts at what the analysts say was the strongest weekly pace in over a year. In fact, they said this was the first time they were net long on MXN since September. BAML also reported that there was a selloff in the GBP after two weeks of buying. The firm stated that while MAA suggests these trends will continue, the technical data indicates it might be a good idea to stay bearish on the MXN and bullish on the GBP. Macro hedge funds slightly upped their long positions in the U.S. dollar.

The BAML team also reported buying in two-year Treasury contracts as hedge funds increased their net longs there. They added that in five of the last six weeks, funds have been snapping up two-year contracts at a strong pace. Further, they said the technical data suggests remaining bullish on two-year Treasuries.

In agriculture, they picked up strong sales of corn and wheat contracts, which they say sold at the strongest weekly place in over a year. Funds cut their long positions in corn and increased their short positions in wheat. The analysts say MAA indicates that these trends may continue.

Hedge funds continue underperforming

BAML also said hedge funds in general are still underperforming the S&P 500. The diversified hedge fund index grew 1.3% in the first two weeks of this quarter, compared to the S&P 500’s 1.9% increase. The firm said Equity Long/Short funds grew 1.7%, but hedge funds following an Equity Market Neutral strategy declined 0.8%.

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