CoT: Positions Of Non-Commercials, The Future Via Futures

Following futures positions of non-commercials are as of September 8, 2020.

10-year note: Currently net long 9.5k, up 23k.

The FOMC meets this week. After the Tuesday-Wednesday meeting, two more remain this year – November 4-5 and December 15-16. As far as policy matters are concerned, not much is expected out of these meetings.

A lot already took place in March-April, with March in particular holding two unscheduled meetings. This was when the fed funds rate was pushed to a range of zero to 25 basis points, an open-ended QE was begun and the Fed announced it would start buying investment-grade corporate bonds, which in April was expanded to also include junk bonds.

Consequently, in three months between early March and early June, the central bank’s assets expanded $2.93 trillion to $7.17 trillion. They have since come down by $158.3 billion, but at $7 trillion as of Wednesday remain massive. After having provided this kind of stimulus, adding more to the balance sheet is hard to justify considering the US economy and stocks are substantially off the lows of February-April.

US equities have taken a hit the past couple of weeks, with the S&P 500 large cap index down just under seven percent from last Wednesday’s record high. If a single digit decline like this meets the threshold of setting off alarm bells at the Eccles Building, then markets will more likely wonder ‘what does the Fed know?’ than get soothed by extra stimulus.

30-year bond: Currently net short 160.4k, down 4.4k.

Major economic releases next week are as follows.

Industrial production/capacity utilization (August) is due out Tuesday. Utilization increased 3.1 percent month-over-month in July to 70.6 percent. In April, utilization was 64.2 percent.

Retail sales (August), the NAHB housing market index (September) and the Treasury International Capital data (July) are scheduled for Wednesday.

July retail sales increased 1.2 percent m/m to a seasonally adjusted annual rate of $536 billion – a new record. This is quite a reversal from April when sales were down to $412.8 billion, which was a seven-year low.

Homebuilder sentiment rose six points m/m in August to 78, matching December 1998’s record. The index is now up 48 points From April when it tumbled to the lowest since June 2012.

In the 12 months to June, net foreign purchases of US equities totaled $165.2 billion – the highest since April 2010. This represents quite a U-turn in their sentiment. In April last year, they were selling $214.6 billion worth – a record.

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