Commitment Of Traders As Of This Week - Futures, Positions

Following futures positions of non-commercials are as of July 9, 2019.

10-year noteCurrently net short 288.8k, down 48.

In the first stare-down with markets since his appointment in February last year, Jerome Powell, Fed chair, blinked.  In this week’s semi-annual Humphrey-Hawkins testimony, he all but said a cut in the fed funds rate is coming later this month.  The FOMC meets on July 30-31.  Ahead of his Congressional appearance, fed funds futures were 100 percent certain of a 25-basis-point cut, to 200-225 basis points.  But after a much-better-than-expected June jobs report, there was speculation that maybe he would signal he would want to wait for more clarity.  That did not happen.  This is not a Fed – neither was Janet Yellen, or Ben Bernanke, or even Alan Greenspan-led – that would dare rock the market's boat, no matter how ridiculous the latter’s wishes.  They are all bound by the wealth effect.  For all intents and purposes, financial markets have become the third mandate – besides the Congressionally mandated maximum employment and price stability.

The need for a cut at this point in time is particularly baffling considering that the Fed’s monetary quiver does not have enough arrows to fight the next recession.  Yes, it has been a decade since Great Recession, and the economy is showing signs of wear and tear.  That said, with the unemployment rate near a five-decade low, it is far from falling apart.  So why fire the scarce arrow now?  It is possible the Fed – and other major central banks – have convinced themselves they have the powers to stop economic contraction, and that the business cycle was dead.  Forget the fact that it is because of this easy-money-can-treat-anything attitude, particularly post-financial crisis, that zombies have grown by leaps and bounds.  Or, maybe because of this very fact these banks know how vulnerable things are and are doing their best not to let the economies slide into another downturn.

30-year bondCurrently net short 11.2k, up 11.8k.

Major economic releases next week are as follows.

Tuesday brings retail sales (June), industrial production (June), the NAHB housing market index (July) and TIC data (May).

May retail sales rose 3.2 percent year-over-year to a seasonally adjusted annual rate of $519 billion.

Capacity utilization in May edged up 0.2 percent month-over-month to 78.1 percent.  Last November’s 79.6 percent was the highest since May 2008.

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