CoT: Peek Into Future Thru Futures, Hedge Funds Positioning

Following futures positions of non-commercials are as of May 28, 2024.10-year note: Currently net short 388.2k, down 12.8k.The trendline resistance proved too much for bond bears (on price) to overcome. On Wednesday, the 10-year treasury yield touched 4.64 percent intraday to close at 4.62 percent. Eight sessions ago – on May 16^th – the rates ticked 4.32 percent to find support at the 200-day moving average (4.35 percent) and reversed higher.The 10-year rallied big on Tuesday and Wednesday on the back of a softer-than-expected auction for five-year notes. Wednesday’s high kissed the upper trendline of a symmetrical triangle, with the upper line going to last October when the rates touched five percent and the lower line to the following December when they bottomed at 3.79 percent.A sustained breakout can have important repercussions across the bond world. The US federal government has been borrowing like a drunken sailor, with national debt at $34.8 trillion, which has doubled in a decade. In a rising rates environment, this means soaring interest payments (more on this here). The US continues to run a deficit even at a time of decent economic growth. This is not a sustainable environment.At some point, the bond vigilantes will revolt, demanding higher yields, and this likely will occur without a warning. That time probably is not now, in which case the symmetrical triangle will work like a charm. The lower trendline lies at 4.4 percent. The 10-year closed out the week at 4.51 percent.30-year bond: Currently net long 43.8k, up 29.7k.The Russell 2000 remains trapped between 2000 and 2100. This week, with a high of 2086 and a low of 2036, the small cap index was essentially unchanged – up 0.02 percent – at 2070.The index has traded above 2000 since early last month, while 2100 has stood like a mountain since early March. Here is why 2100 is significant.The Russell 2000 peaked in November 2021 at 2459, subsequently reaching 1641 in June 2022, which was successfully tested in October of both 2022 and 2023. A 61.8-percent Fibonacci retracement of that drop tallies to 2144. The index lost 2100 in January 2022 and has since struggled at that price point; 2100 also represents a measured-move price target post-breakout at 1900 last December. Before that, the index went back and forth between 1700 and 1900 going back to January 2022.Repeated failure at 2100 suggests the path of least resistance is toward 2000 at best and 1900 at worse.US Dollar Index: Currently net long 4.2k, up 656.Yet again, a rising trendline from last December when the US dollar index bottomed at 100.32 drew bids, but nothing much came out of it. This week, the index finished unchanged – down 0.01 percent – to 104.63.Tuesday’s low of 104.26 also successfully tested the 200-day (104.27), which was again visited on Friday. That said, dollar bulls’ attempt at the 50-day (104.95) was rejected both Thursday and Friday.Horizontal support at 103-104 goes back to December 2016. A likely breach ahead of the December trendline should swing near-term odds to dollar bears’ favor.VIX: Currently net short 42.7k, down 8.6k.VIX added 0.99 points this week to 12.92 but failed to keep most of its gains. Thursday, the volatility index ticked 14.88, followed by Friday’s 14.87; in both those sessions, the 200-day (14.71) was reclaimed intraday but lost by close. In the end, a shooting star formed on the weekly.Going back six years, volatility bulls have repeatedly defended 12. The streak likely continues. That said, the daily likely comes under pressure in the sessions ahead. On May 23^rd, VIX reversed higher from a low of 11.52 to close at 12.77.Thanks for reading!More By This Author:On Back Of Soft Demand For Treasury Auction, 10-year T-yield Rallies To Upper End Of Symmetrical Triangle
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CoT – Peek Into Future Through Futures & How Hedge Funds Are Positioned