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Hedge Funds S&P 500 Buying Up; NASDAQ Selling Ends: BAML

Hedge funds have been snapping up shares of S&P 500 companies like they’re going out of style. In fact, buying for S&P 500 companies is the strongest it has been in over three months, according to analysts at Bank of America Merrill Lynch. Hedge funds have also halted their NASDAQ sell-off. (All graphs in this article are courtesy BAML.)

Hedge Funds S&P 500

Hedge funds were busy

Analysts Ankur Singh, Jue Xiong and MacNeil Curry have released the latest edition of their Hedge Fund Monitor. They report that data from the Commodity Futures Trading Commission indicates that hedge funds were moving across all the asset classes.

Speculators moved from being net short to net long overall and increased their net long positions to NASDAQ contracts, reversing the two-week trend of strong selling. According to the BAML team, the technicals are still bullish, and long positions could increase even more, suggests MAA data.

Hedge funds loving silver, crude

Another interesting new trend that has emerged among hedge funds recently is ultra-bullish buying of silver. The analysts report that large speculators increased their net long positions to a three-month high. Further, they grabbed up silver at the fastest weekly pace since 1997.

Hedge funds were also buying gold, picking up the metal at the fastest pace since June and increasing their net longs. MAA data suggests that the long positions will continue climbing, although the BAML team states that the technical are neutral.

Hedge Funds S&P 500

In energy, the BAML team said speculators were “marginally” buying crude oil contracts as they increased their net long positions in crude and keeping them close to their six-month highs. Natural gas contracts also attracted speculators, which reversed their net short positioning on them. Both MAA and the technical suggest speculators will remain bullish on crude and natural gas.

Hedge Funds S&P 500

Euro, yen short positioning decline

For the fourth consecutive week, speculators bought euro contracts, thus cutting their net short positioning to the lowest level it has been at year to date. Last week was also the second week hedge funds cut their net short positioning in Japanese yen contracts. The BAML team reports that the technicals and MAA on both currencies are bearish.

Hedge Funds S&P 500

Hedge Funds S&P 500

Last week was also the fourth in a row in which speculative funds sold two-year contracts in interest rates, thus cutting their net long positioning. The four-week stretch of selling follows seven straight weeks of buying. The analysts say the technical suggest “near term range trading.”

It was also the seventh week large speculators sold corn, raising their net short positioning to the crop to the biggest in one year. The BAML team states that positioning is nearing “stretched levels,” but they think shorts will increase more.

Hedge funds continue to underperform

Overall, hedge funds are continuing to underperform the S&P 500, with the diversified hedge fund index edging upward by 0.5% for the week ending May 20. The S&P 500 climbed 1.3% on a price returns basis during the same time frame.

Of major hedge fund strategies, Macro funds were the best-performing, climbing 1%. Equity Market Neutral funds slumped, falling 0.2%. The analysts say Equity Market Neutral funds pushed their market exposure down to 11% net long from their previous 13% net long.

Hedge Funds S&P 500

Equity Long/ Short funds saw their exposure increase from 25% net long to 29% but still keeping their exposure lower than the benchmark level of 35% to 40%.

Hedge Funds S&P 500

Hedge Funds S&P 500

Hedge Funds S&P 500

Macro hedge funds lowered their long exposures to both the S&P 500 and the NASDAQ while increasing their long exposure on the U.S. dollar and short exposure to 10-year Treasuries. They also upped their exposure to short commodities and their long emerging markets exposure.

Hedge Funds S&P 500

Hedge Funds S&P 500

Hedge Funds S&P 500

Hedge Funds S&P 500