European markets have pursued a strategy of "go ugly early" this morning, with major indices gapping down and most trading more than 2% off of yesterday's closing level. The reason, of course, was yesterday's frankly bizarre price action in the SPX, which went up and down like the elevator in a high-rise office building.
Consider, if you will, yesterday's roller-coaster ride and some of the rationales ascribed to the price action:

A: Oil's off three bucks and Barron's put the bear on the cover. The bull is back, baby!

B: Oh no! We've suddenly realized that Freddie Mac and Fannie Mae have a lousy business model and are, well, buggered!

C: Hurrah! The government will bail out Fannie and Freddie!

D: Err....with what money?

Feel free to fill in your own captions to explain yesterday's craziness.

Perhaps the best word to describe yesterday's equity price action is "schizophrenic." What was particularly odd about yesterday was that despite the intraday volatility, a new closing low, and the first trading day after a long weekend, VIX barely budged. Now, one could take this as a sign of complacency, a sign that longs are still not prepared to pay up for insurance. On the other hand, one could interpret it as a sign that the market is already short and/or hedged, and thus liable for a squeeze.

So which is it? Macro Man ran a little study to try and find out. He regressed the daily return of three HFR hedge fund indices- equity funds, "market directional" funds, and macro funds- with the daily return of the SPX, using 20 day rolling correlations. A positive correlation implies that the strategy in question is long, whereas a negative correlation implies short positioning. The results were pretty interesting.
As the chart above indicates, macro funds are really quite short, exhibiting the highest negative correlation to equities since the financial crisis began.