Vix

Large speculators surged into GBP/USD long bets last week, pushing net-long exposure to a record high and at the fastest weekly pace since records began. They also continued to trim net-short exposure to yen futures for a second week, after it nearly reached a record high of its own.

It is the second week in a row that open interest on VIX futures notched up a volatile swing, according to the latest COT report. If the VIX can remain low, perhaps we'll see the S&P 500 reach new highs, unless US economic data deteriorates too quickly and rings recessionary bells.

When open interest on the VIX rises at its second largest weekly pace on record, it’s best to take notice. Especially when it reached a 5-year low before snapping a 4-week losing streak. We also take a look at positioning on the USD index, EUR/USD, GBP/USD, NZD/USD, gold and WTI crude oil.

Asset managers reached a record level of net-short exposure to VIX futures, days before prices fell to a record low. Traders also remain net-long USD despite losses in recent weeks.

With asset managers and large speculators trimming long and short exposure to yen futures, their appetite to speculate on the currency appears to be waning after BOJ interventions.

Net-short exposure to yen futures rose to a 16-year high last week, and now within reach of its record. Asset managers appear to be on the right side of the US dollar trade, with large speculators remaining net-short despite the dollar's rally. Net-long exposure for oil and gold futures continued to trend higher, but neither are at levels which screams sentiment extreme. And asset managers are on the cusp of flipping to net-long exposure to the VIX.

Prior drops below 12 in the VIX have led to historically below average returns in the S&P 500 over the next 1, 3, and 12 months.

Previous 8-day declining streaks in the VIX have been bullish for the S&P 500, but patience is warranted.