From Richard M. Smith, PhD, Founder, TradeStops:

The commercial traders in the S&P 500 Futures markets made an extreme move last week… the kind of move we rarely see.

They went from a bullish extreme to a near bearish extreme in a single week. Take a look:

Now normally I look to trade with the S&P 500 commercial futures traders. Given that I wrote last week that I’m leaning bearish at the moment, such a huge bearish move on the part of the commercial traders should be a major confirmation of my bearish thesis. Right? I should be putting on a massive short position immediately. Right?

Not so fast… sentiment based indicators aren’t always what they seem. Sometimes even the market insiders rush over to the other side of the boat too quickly.

This chart shows a couple of the more recent instances of sharp sentiment drops by S&P…