To The Moon

In the past two months, U.S. stocks have rebounded from their historical lows in the first half of the year. However, the enthusiasm of retail investors in U.S. stocks recently seems to be fading.

The $S&P 500(.SPX)$ fell for a second straight week and had its worst day in two months after FED Chairman Jerome Powell hawked the Jackson Hole central bank on Friday.

Short S&P 500 positions have increased over the past few weeks, with net short positions in S&P 500 futures rising to 260,000 contracts as of last Tuesday, close to June 2020, according to the Commodity Futures Trading Commission (CFTC) the high point.

That means traders are upping their bets on a decline in U.S. stocks. Meanwhile, short interest among institutional investors in hot tech stocks has begun to rise, and recent declines in tech stocks suggest that a strong summer rally is stalling.

Investors are ramping up bets on a market downturn, a sign of waning sentiment that could herald a return to volatile trading in the first half of 2022.

Markets are skeptical of a rebound in U.S. stocks, said Mark Hackett, head of investment research at Nationwide. In addition, analysts and investors expect a new round of pressure on corporate earnings in the U.S. in the coming months. 

Analysts generally expect U.S. stock market profits to rise about 8% this year, down from 10% in early July, according to a FactSet survey.

While short positions in S&P 500 futures point to a bearish outlook for institutional investors, the view among retail investors appears to be more optimistic.

VandaTrack data shows that retail investors have seen their purchases of inverse ETFs taper off over the past few weeks.

Hackett said that retail investors are actually quite optimistic, and it is actually the pessimism of retail investors that is more likely to cause the market to fall.

It is worth mentioning that this week, US stock investors will usher in the latest non-farm payroll report, consumer confidence survey and manufacturing index, while retail giants $Best Buy(BBY)$ , $Hewlett Packard Enterprise(HPE)$ and $Campbell Soup(CPB)$ will release new quarterly earnings reports.