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Bailey McCann, Opalesque New York:

Hedge funds are taking fewer extreme positions according to new data from Bank of America Merrill Lynch. This means hedge funds should start having more room to trade going into year end although it still seems unlikely that asset inflows will achieve levels that would allow for significant shifts in equities exposure. In terms of individual investments, hedge funds are in a crowded long on wheat and crowded short on the Euro.

The investable hedge fund composite index was down 0.46% last week ending November 14, compared to down 2.80% for the S&P 500. Hedge funds are down 0.98% quarter-to-date: Convertible Arbitrage & Market Neutral are the best performers for the period, up 0.08% and down 0.04%, respectively; CTA Advisors performed the worst and was down 3.02%. Overall, funds are buying the S&P 500, shoring the NASDAQ 100 and adding to their shorts of Russell 2000 futures.

In commodities, funds sold soybean & corn, but bought wheat. Soybean moved out of a crowded long for the first time since June of this year. In precious metals, funds bought gold, doubled their shorts in copper, and were essentially flat in silver, platinum and palladium. In currencies, speculators are aggressively buying the US Dollar.

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