Hedge funds keep flip-flopping in terms of what to do with S&P 500 stocks. They were selling off S&P contracts the week ending June 5 after gobbling them up hungrily the week before. Overall, hedge funds were very busy last week across all the asset classes, according to Bank of America Merrill Lynch’s latest Hedge Fund Monitor report.

Hedge funds buying S&P 500 contracts

Analysts Ankur Singh, Jue Xiong and MacNeil Curry report that hedge funds moved toward net long positions on S&P 500 contracts this past week after the previous week’s strong selling. (All charts/ graphs in this article are courtesy BAML.)

hedge funds

Speculative funds also increased their net long positions to the NASDAQ and decreased their short positioning toward the Russell.

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The BAML team suggests that the technical indicate that all three indexes will see consolidation for now, while MAA data suggests a decline in longs. Overall, the firm reports that hedge funds’ long / short market exposure was approximately 29% net long, which was slightly lower than the benchmark of between 35% and 40%.

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Large speculative hedge funds stay net long

BAML data also indicates that large speculative hedge funds remained net long on gold. They sold silver at a very strong pace, pushing their net long position down. Further, copper sales were at their strongest weekly pace in over a year, becoming net short by the end of the week. The BAML team reports that both MAA and technical data suggest that funds will continue selling off all three metals.

hedge funds precious metals positions

Copper futures

In energy, funds sold crude contracts following two weeks of heavy buying activity. After last week, they had decreased their net long positions. Over the last ten weeks, hedge funds have only sold crude oil contracts in three of them.

Energy futures

The BAML team suggests that this trend may be hitting the top and could see a downside correction. MAA also suggests that longs will continue declining.

Large speculative funds sold the Japanese yen for the second consecutive week, thus raising their net short positions. They also sold contracts on the Australian dollar, reversing their position to become net short. BAML analysts believe both shorts will continue rising.

JPY - AUD

Hedge funds outperform the S&P 500

Overall, hedge funds outperformed the S&P 500, with the diversified hedge fund index being flat for the week through June 3. The S&P was down 0.4% on a price returns basis, according to BAML. The strongest funds last week were Convertible Arbitrage forms, which recorded 0.6%. On the other side, CTA funds were the worst-performing last week, declining 1.6%.

hedge funds