For Club iNSIDER Traders: What Does the Abrupt Change in VIX Positioning Mean

The latest changes in speculators’ positioning are leaning towards VIX, the euro, and emerging market equities. The market is shaping what may be the beginning of a secular trend, where the concentration of U.S. risk in global portfolios is decreasing in favor of non-dollar assets. In the short term, this is what the positioning data reflects.

The latest Commitment of Traders data for speculators, published on Friday evening and reflecting positioning as of last Tuesday, shows that the euro has the largest monthly increase in net long position as a percentage of open interest on a five-year percentile basis. This is followed by the South African rand – perhaps linked to the relentless rise in gold – then VIX and MSCI EM.

On the other end of the spectrum, some of the biggest declines in net long positions are in the S&P 400 midcap index, Nasdaq, and DXY futures.

The initial surge of the dollar before and after Trump’s election, which always seemed questionable, did not hold, as Bloomberg’s dollar index erased 50% of its gains from September to January. Positioning quickly shifted from very long to relatively short, which aligns with further dollar declines.

The cooling sentiment in the U.S. and the search for alternatives also align with the surge in net long positions in MSCI EM futures. Europe is the obvious – and most liquid – market as an alternative to the U.S., but there are several opportunities in emerging markets that could provide significant returns in the coming months and years.

The fact that the current environment of tariffs and less certainty about the future role of the dollar in global finance is a problem for the U.S. market can be seen in the weaker performance of U.S. stocks and the rise in VIX.

It is rare for speculators to be net long in VIX – it is usually too lucrative to bet on low volatility. But these times are unusual, and speculators recently turned net short in VIX for the first time since a brief episode last October. They have been (only) net long since last Tuesday, but VIX has risen since then, so there is a high likelihood they are short again.

Times when speculators are net long in VIX are usually periods of higher volatility.

This week carries many short-term risks – tariff announcements, employment data, as well as ISM and PMI indicators – but long-term trends are also being observed. A critical aspect in the coming months will be identifying themes that are more fleeting and those that will persist for several years or more.