Peek Into The Future Through Futures, How Hedge Funds Are Positioned

Following futures positions of non-commercials are as of May 14, 2019.

10-year note: Currently net short 352.8k, up 22.3k.
 

 

Last October, the 10-year Treasury yield (2.39 percent) peaked at 3.25 percent before coming under sustained pressure. It bottomed at 2.36 percent in March.The rally since that low stopped at 2.62 percent, a crucial level going back a decade. The March low was tested this Wednesday – successfully.The daily is oversold, so at this point in time the risk is more to the upside than to the downside.

With that said, major moving averages are all pointing down.If yields rally near term, the 50-day, which lies at 2.51 percent, can entice bond bulls. They likely will be salivating if 2.62 percent is tested.The latter is not going to give way anytime soon. Bond bears, including non-commercials with sizable net shorts in 10-year note futures, may have to wait a while before that happens.

30-year bond: Currently net short 45.9k, up 10.9k.
 

Major economic releases next week are as follows.

Existing home sales for April are due out Tuesday. March sales were down 4.9 percent month-over-month to a seasonally adjusted annual rate of 5.21 million units.The cycle high 5.72 million units was reached in November 2017.

On Wednesday, FOMC minutes for the March 19-20 meeting are released.

Friday has April’s durable goods on tap.In the 12 months to March, orders for non-defense capital goods ex-aircraft – proxy for business capex plans – increased 5.3 percent to $70 billion (SAAR), a new high.

Crude oil: Currently net long 593.1k, down 6.8k.
 

 

Oversold technical conditions plus Middle East tensions helped the cash ($62.92/barrel) rally two percent this week.

For two weeks prior to Thursday’s 1.4-percent rally, the crude essentially went sideways, with bulls hugging the converging 50- and 200-day moving averages. A golden cross formed last week, with merely $1.10 separating the two. Four weeks ago, WTI peaked at $66.60. For continued momentum, bulls need to take out short-term resistance just north of $63 and then $64.70s, before that high could be tested.

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