CoT This Week; Hedge Fund Positions

Following futures positions of non-commercials are as of June 4, 2019.

10-year noteCurrently net short 467.7k, up 91.5k.

Friday’s intraday low of 2.05 percent came pretty close to testing the September 2017 low of 2.03 percent.  A breach of that low will only add to momentum intact since the 10-year Treasury yield (2.08 percent) peaked at 3.25 percent last October.  Since that peak, there has been a pattern of lower highs, lower lows, including this week.  In the process, bond bears (price) lost major support at 2.62 percent, which goes back a decade.  This was then followed by a loss two weeks ago of 2.36 percent which, the next time the 10-year rallies, is bound to act as resistance.  Even before that, gap-down resistance lies at 2.18 percent.

The daily is trying to stabilize.  Given the 37-basis-point drop in May, sideways action should help repair damage, so shorter-term averages begin to at least flatten out.

Non-commercials in the meantime aggressively added to net shorts in 10-year-note futures, which nothing but raises squeeze odds in the future.  As price rises, yield drops.

30-year bondCurrently net short 9.5k, up 181.

Major economic releases next week are as follows.

The NFIB small-business index and PPI – both for May – are due out Tuesday.

Small-business optimism in April rose 1.7 points month-over-month to 103.5.  This was the 29th straight month of 100-plus reading, including last August’s record 108.8.

Producer prices in April increased 0.2 percent m/m and 2.2 percent year-over-year.  Core PPI over the same time period rose 0.4 percent and 2.2 percent, in that order.

CPI for May is scheduled for Wednesday.  In April, CPI and core CPI edged up 0.3 percent and 0.1 percent m/m.  In the 12 months to April, they respectively rose two percent and 2.1 percent.

Friday brings retail sales (May), industrial production (May) and the University of Michigan’s consumer sentiment index (June, preliminary).

Retail sales in April edged down 0.2 percent from March’s record $514.3 billion; year-over-year, they rose 3.1 percent – much slower than the 6.6-percent pace last July.

In April, capacity utilization fell 0.7 percent m/m to 77.9 percent.  The cycle high 79.6 percent was reached last November.

Consumer sentiment in May rose 2.8 points m/m to 100.  The 101.4 reading in March last year was the highest since January 2004.

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