The S&P 500 chart have been marked with 5 occasions when the net short position of manage money was high, a high or low position involves more than 2 million contracts in open interest as reported by the commitment of traders report. At the bottom in March we came close to that number.
However, even after what looks like a sporadic rally short positions by manage money traders have only gone up to crossed the 2 million mark. Previous occasions show that lead to multi-month rallies. At the tops sometimes more than 2 million contracts directly long as was the case at the 2018 top. This extreme negative positioning of course does not coincide with the daily sentiment index that had crossed 90% bullish a weak back. The DSI is probably a short-term overbought signal that gives us a correction or consolidation. The positions of manage money traders like hedge funds indicates the medium term sentiment that remains extremely negative and therefore counterintuitively is bullish for the market.