Day traders took a decidedly bullish stance last week, but the optimism could point to more short-term turmoil for stocks.
Equities traders put 6.8 percent of assets into U.S. leveraged long exchange-traded funds in the past week, while pulling 7.9 percent of assets out of leveraged short funds, according to a Monday report from investment research firm TrimTabs. The weekly inflows were the biggest this year, and outflows were the largest in seven weeks.
The volatile funds move with or against an indicator like the S&P 500, and are designed to rise or fall two to three times as much as their benchmark. Flows last week, when stocks plummeted early on only to mount a sharp reversal, could signal more volatility in the near term, according to TrimTabs.
"Traders of leveraged ETFs, most of whom are day traders and retail investors, have turned extremely bullish on stocks, which is a negative sign from a contrarian perspective," TrimTabs said in the report.