CoT: Peek Into Future Through Futures For The Week Ahead, February 9

Following futures positions of non-commercials are as of February 4, 2020. 10-year note: Currently net short 358.9k, up 88.5k.

One more week of additional liquidity from the Fed!In the week to Wednesday, SOMA (System Open Market Account) holdings went up $18.8 billion to $3.79 trillion. Since the last week of September last year, they have gone up by $239.1 billion. Back then, these assets were $3.55 trillion, down from $4.24 trillion in April 2017. For reference, they were under $500 billion pre-2008/2009 financial crisis.

The Fed is growing its balance sheet at a time when the economy continues to grow and churn out jobs. January added 225,000 non-farm jobs.Imagine what shape the balance sheet will take when the economy begins to contract. As things stand, equities cherish an expanding balance sheet. This was repeatedly seen when the Fed carried out QE1/2/3.Most recently, stocks bottomed early October last year, coinciding with the bottom in SOMA holdings.

The Fed’s ability to print money knows no bounds, and stocks love liquidity. This is a nightmare scenario for bears – until the cycle reaches a point when the Fed continues to expand its balance sheet and stocks begin to go the other way. When such a time arrives, the 10-year Treasury yield (1.58 percent) probably will be a lot lower, well past the lows of both July 2012 and July 2016 – 1.39 percent and 1.34 percent, respectively. For now, rates face resistance at 1.67 percent and just under two percent after that.

30-year bond Currently net short 63.8k, up 8.8k.

Major economic releases next week are as follows:

NFIB job openings (January) and JOLTS job openings (December) are on tap Tuesday.

In December, small-business job openings fell five points month-over-month to 33. Between December 2018 and July 2019, record 39 was hit three times.

Non-farm job openings in November dropped 561,000 to seasonally adjusted 6.8 million.The all-time high of 7.63 million was reached in November 2018.

The CPI (January) will be published Thursday. In December, consumer prices and core CPI respectively edged up 0.2 percent and 0.1 percent m/m.In the 12 months to December, they both rose 2.3 percent.

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

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