The CoT Week: How Hedge Funds Are Positioned, What Futures Are Foretelling

Following futures positions of non-commercials are as of November 12, 2019.

10-year noteCurrently net short 148.8k, down 82.7k.

TLT (iShares 20+ year Treasury bond ETF) peaked at $148.90 on August 28, ending the week at $137.76.  Since that peak through Wednesday this week, the ETF attracted $1.7 billion (courtesy of ETF.com).  Bond bulls apparently treated the selloff as an opportunity to add – wrongly, one might add.  From that high, TLT then dropped all the way to $134.45 set on Thursday last week.  Interestingly, longs used the latest rally to cut back.  In the seven sessions through Wednesday this week, $1.3 billion was withdrawn.

If TLT is rightly capturing investor sentiment, then the 10-year Treasury yield (1.83 percent) could be headed higher in due course.  On September 3, rates bottomed at 1.43 percent before progressively setting higher lows.  Encouragingly for bond bears, the 10-year rallied to 1.97 percent on the 7th this month, eclipsing the prior high of 1.9 percent from September 13, for a pattern of higher highs.  Once again, from bond bears’ perspective, this is positive.

Currently, the 10-year yield is in the process of unwinding its daily overbought condition.  The 50-day moving average rests at 1.75 percent.  More important perhaps is trend-line support from the early-September low at 1.60 percent.  How these support levels get defended will tell us a lot as to if TLT is indeed sending the right signal.

30-year bondCurrently net short 45.4k, down 9.2k.

Major economic releases next week are as follows.

  • The NAHB housing market index (November) is scheduled for Monday.  Builder optimism rose three points month-over-month to 71 in October, matching the reading from February last year.  Two months before that, in December 2017, the index hit 74, which was the highest since 75 reached in July 1999.
  • Housing starts (October) are due out Tuesday.  Starts declined 9.4 percent in September from August’s cycle high 1.39 million units (seasonally adjusted annual rate).
  • Wednesday brings FOMC minutes (October 29-30 meeting).  The Fed delivered its third straight quarter-point drop in the fed funds rate in that meeting, to a range of 150 to 175 basis points.
  • Existing home sales (October) are published Thursday.  September was down 2.2 percent m/m to 5.38 million units (SAAR).  The cycle high 5.72 million was reached in November 2017.
  • The University of Michigan’s consumer sentiment index (November, final) is on tap Friday.  Preliminarily, sentiment rose two-tenths of a point m/m to 95.7.  Except for August’s 89.8, it has been north of 90 since November 2016, four of them 100 or higher.
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