How to Read the Hedge Fund Chart

Understand hedge fund positioning.

Team Sang Lucci & Wall St. Jesus avatar
Written by Team Sang Lucci & Wall St. Jesus
Updated over a week ago

This indicator is based off of a composite of hedge fund tracking indexes.

It compares this index of hedge fund exposure against returns in the S&P 500 to see how much exposure hedge funds appear to have to the stock market.

  • When funds are heavily exposed, meaning loaded up” to stocks, the markets are in danger of consolidating or pulling back, as these funds retrench.

  • When they are under-exposed, then stocks may see buying pressure come in as funds add exposure.

Think of the funds as a potential big seller or buyer of stocks.

If their inventory is high and they get a reason to sell, they can create a lot of selling pressure. The contrary is also true: if inventory or exposure is low, they can create a lot of buying pressure.

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