This Week's Commitment Of Traders; Hedge Fund Positions, Futures

Following futures positions of non-commercials are as of June 18, 2019.

10-year noteCurrently net short 403k, up 37k.

Yet another intraday low on the 10-year Treasury yield this week!  Since peaking at 3.25 percent last October, there has been a distinct pattern of lower highs and lower lows.  Thursday, the 10-year (2.07 percent) fell three basis points to two percent, with an intraday low of 1.98 percent.  With that, the September 2017 low of 2.03 percent has been breached.  Thursday also produced a spinning top right above the daily lower Bollinger band.  Plus, there was a weekly hammer.  A relief could be at hand, provided rates begin to consolidate at these levels.  Daily and weekly indicators are in oversold territory.  In the event of a rally, immediate resistance lies at 2.18 percent (gap-down), followed by 2.36 percent (short-term horizontal) and 2.62 percent (decade-old horizontal).

Bond vigilantes, who have played cautious since last October, were sort of vindicated this week as the Fed signaled a willingness to cut policy rates.  Stocks in the meanwhile continue to diverge with the long end of the yield curve.  They are hoping the Fed would be cutting rates aggressively in months to come and that this would stop the economy from sliding into recession.  The fed funds rate is already at 2.4 percent.  The current expansion is a week from completing a decade.  Would lower rates matter at this point in the cycle?  Time will tell.

30-year bondCurrently net long 18.3k, up 101.

Major economic releases next week are as follows.

Tuesday brings the S&P Case-Shiller home price index (April) and new home sales (May).

Nationally, home prices in March rose 3.7 percent year-over-year – decent but much slower than the 6.5 percent pace clocked in March last year.

New home sales dropped 6.9 percent month-over-month in April to a seasonally adjusted annual rate of 673,000 units.  March’s 723,000 was the highest since October 2007.

May’s durable goods orders are due out Wednesday.  April orders for non-defense capital goods ex-aircraft – proxy for business capex plans – increased 1.2 percent y/y to $68.7 billion (SAAR).  Orders peaked last July at $70 billion.

Thursday, 1Q19 GDP (third revision) and 1Q19 corporate profits (revised) are published.

The second estimate showed real GDP grew 3.1 percent last quarter.  As of June 18, the Atlanta Fed’s GDPNow model forecasts this is expected to decelerate to two percent growth in the current quarter.

Preliminarily, corporate profits with inventory valuation and capital consumption adjustments grew 3.1 percent y/y to $2.25 trillion (SAAR) – quite a deceleration from the 10.4 percent pace of 3Q18.  Profits peaked at $2.32 trillion in that quarter.

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