Peek Into The Future Via Futures: This Week’s Commitment Of Traders

Following futures positions of non-commercials are as of August 21, 2018.

10-year note: Currently net short 700.5k, up 2.3k.

The 10-year T-yield (2.83 percent) lost five basis points this week.  The neckline of a potentially bearish head-and-shoulders formation has been broken.  The way yields have gone up and down since January, it is a rising neckline that has been broken.  Another one – a straight one – can also be drawn, and this one does not break until 2.75 percent.  The 200-day moving average lies at 2.77 percent.  If this breaks, technicians would be eyeing 2.35 percent for completion of the pattern.

Here is the thing.  Should things evolve this way, on its way there, yields would have broken 2.6 percent, which stopped rally attempts for more than a year until they broke out this January.  Besides, a trend line from July 2016 when yields fell to an all-time low of 1.34 percent extends there.  Bond bears do not want to see a breach of this level.  When it is all said and done, they may have themselves to blame.  The record amount of net shorts in 10-year-note futures that they have accumulated can act as a self-fulfilling prophecy.  As yields drop, they drop more as shorts give in.

30-year bond: Currently net short 8.5k, down 18k.

Major economic releases next week are as follows.

On Tuesday, the S&P Case-Shiller home price index for June is on the docket.  Nationally, home prices increased 6.4 percent year-over-year in May.

GDP (2Q18, 2nd estimate) and corporate profits (2Q18) are on tap Wednesday.

The first estimate showed real GDP expanded 4.1 percent last quarter.

In 1Q18, corporate profits with inventory valuation and capital consumption adjustments increased 4.3 percent on an annual basis to a seasonally adjusted annual rate of $2.2 trillion.  Profits peaked at $2.23 trillion in 4Q14.

July’s personal income and spending is due out Thursday.  In the 12 months to June, core PCE (personal consumption expenditures) – the Fed’s favorite measure of consumer inflation – rose 1.9 percent.  The last time this metric grew with a two handle was in April 2012.

Friday brings the final reading of August’s University of Michigan consumer sentiment index.  Preliminarily, sentiment dropped 2.6 points m/m to 95.3.  March’s 101.8 was the highest since January 2004.