Until the last couple of weeks, net speculative positioning in financial markets was all on one side of the boat with speculators are woefully unprepared for a major risk-off event, suggesting complacency had reached epidemic levels as equities broke out to new highs.
Then the calendar rolled over to October and everything changed.
In the last two weeks, the aggregate net speculative positioning in futures in what are considered traditional risk-off assets – gold, 10-year Treasuries, and the VIX – surged by the most since Brexit.
As speculative shorts in VIX, Treasuries, and precious metals were pummeled last week.
As VIX spiked from under 12 to almost 29…
VIX speculators net positioning suffered a dramatic short-squeeze as once again picking up pennies in front of that Minsky-steamroller, snapped a few fingers…
This is the second biggest short-squeeze in the vol complex in history (and this time no ETF-driven collapse drove it).
And as leveraged speculators abandon their ‘no-brainer’ short-vol trades, Treasury speculators continue to slowly but surely abandon their record short bond positions.
And given the moves in gold and copper recently, bond yields are set to push notably lower squeezing those record shorts even more.
Finally, as gold surged from under $1190 to over $1230…
Gold’s net speculative positioning flipped from short to long for the first time in two months.
The last time gold speculators went from that short with a huge cover was March 1999…
And all this is happening as Speculators pile long into the USD, but the dollar won’t rally.
Additionally, Russia added the most gold to its reserves in two years in the last month.
And as Russia piles into precious metals, it is dumping Treasuries.
Finally, we note that as reality starts to chip away at complacency, China has suddenly lost control of its currency.
