The US stock market, especially the S&P 500 index, is currently the main focus of global traders. On one hand, the index price is still holding strong at high levels, but on the other hand, warning signs about a massive surge in bearish bets or short positions are popping up everywhere.
Based on the latest data from Twitter posts by the kobeissi letter and coin bureau, short interest or bearish bets against US stocks have surged to their highest levels since 2010. For the S&P 500, short interest reached 3.7% to 3.79% of its free float, while the Russell 3000 hit 6.1% to 6.3%. This surge is even higher than the peak levels during the 2008 Financial crisis at 5.0% and the 2020 Pandemic at 6.0%. Technically, when bearish bets become this crowded, it actually increases the chances of a very aggressive short squeeze.
Even though bearish talk on social media is getting loud, the market summary shows a relatively calm picture. The S&P 500 is still holding at 7,509.20 with a 0.89% gain, supported by a strong push from Nasdaq 100 which rose 1.93% to 29,155.18, alongside other major global indices like FTSE 100, DAX, and CAC 40 moving in the green zone. On the macro side, US 10Y bond yields are leveling off, annual US inflation sits around 3% to 4%, and the Fed interest rate is expected to hold steady at 3.75%.
Looking at the economic calendar from tradingeconomics, US macro data releases such as MBA Mortgage Applications, EIA crude oil stocks, and the 17 week bill auction show moderate liquidity and energy supply dynamics without any sudden extreme crisis.
Looking at the technical structure on the 1 hour chart, the S&P 500 is currently moving inside an ascending channel with the nearest resistance around 7,518.54 and strong support at 7,300.00. Price is bouncing off the moving average SMA 50 close, while the stochastic RSI indicator is sitting at 70.44, showing that short term bullish momentum is still intact before testing the upper boundary of the channel.
Meanwhile on the daily chart, the market shows a broader consolidation pattern between key support at 7,294.16 and its peak area at 7,620.79. The daily stochastic RSI has just turned up from oversold territory around 38.24, giving the price enough breathing room to continue its upward move or at least trade sideways near the top zone.
Interestingly, the CNN fear & greed index shows a score of 44, meaning market sentiment is currently in fear territory. This score is slightly higher than last week or last month, but completely different from one year ago when it was in greed at 73. Even with retail traders feeling fearful, the S&P 500 is still trading well above its 125 day moving average, showing that the long term uptrend structure is not broken.
My Opinion
In my opinion, the chance of a real bear market coming right now is very low because heavy short bets piled up during a fear sentiment of 44 are more likely to trigger a short squeeze than a continuous crash. Technically, the S&P 500 is holding strong above the key support level at 7,294 and the SMA 50, meaning this is just normal market consolidation with no confirmed structural breakdown. Our trading strategy should stay simple, do not panic over media hype, wait for clean bounce setups around demand zones, and manage your risk with strict discipline.
Source
⛔Disclaimer - This analysis is for educational purposes and reflects personal opinion only, not financial advice. Always practice risk management and use stop losses (SL) according to your own risk tolerance.
Keep trading and stay profitable📊
Posted Using INLEO
