Looking through the Commitments of Traders report from last Friday, I took note that large speculators are close to having a net long position on the E-Mini S&P 500 (ES) futures for the first time since last August.

The current short position is only 45,029 contracts—the only time in the past year the net short position has been under 50,000 contracts.

Conversely, large speculators have not been net long on the E-Mini Nasdaq 100 (NQ) futures for the past year and have increased the long positions in the past few months.

In mid-June large speculators were long less than 20,000 contracts and as of Friday, they are long 78,348 contracts.

I find this interesting in that large speculators seem to be using the ES as a hedge for the NQ. It seems odd, but when you think about it, is makes some sense.

When the market is in rally mode, the Nasdaq tends to gain more ground than the S&P. When the market is in bearish mode, the Nasdaq tends to drop more than the S&P.

If my theory is correct, with the group adding to their net long position on the NQ and lowering their net short position on the ES, this suggests that large speculators are becoming more bullish toward the market as a whole.

If indeed they are using the ES as a hedge against their long position on the NQ, by lowering their bearish holdings on the ES they are indicating they don’t see as much of a need for the hedge.