Following futures positions of non-commercials are as of January 21, 2025.10-year note: Currently net short 580.2k, up 12.3k.
The FOMC meets next week. The 28-29 meeting is the first this year. It is certain the fed funds rate will be left unchanged at a range of 425 basis points to 450 basis points. Markets do not expect a move, nor has the Federal Reserve given a wink and a nod to expect one.The benchmark rates are 100 basis points lower from the cycle-high 525 basis points to 550 basis points. There was a time markets were expecting the Fed to aggressively lower this year. Not so now. In the futures market, traders have their money on one 25-basis-point cut for sure and maybe two.The ongoing strength in the economy, combined with sticky consumer inflation above the Fed’s two percent goal, have markets demanding less easing. The Fed is not – and should not be – in a rush to continue to cut.That said, with President Donald Trump occupying the White House now, it is not going to be easy for Jerome Powell, Fed chair. The President, speaking virtually at the World Economic Forum in Davos Thursday, called for lower rates not just in the US but globally. If Trump’s first term is any indication, this will not be the last time he will try to jawbone the central bank into looser monetary policy. Powell should not flinch. Markets are likely to puke should Fed independence gets compromised.30-year bond: Currently net long 24.5k, up 24.4k.
Major US economic releases for next week are as follows.New home sales (December) are on schedule for Sunday. November sales increased 5.9 percent month-over-month to a seasonally adjusted annual rate of 664,000 units – a two-month high.Durable goods orders (December) and the S&P Case-Shiller home price index (November) will be published Tuesday.Orders for non-defense capital goods ex-aircraft – proxy for business capex plans – rose 0.4 percent m/m to $74.1 billion (SAAR). This was a new high.In October, home prices nationally decelerated to year-over-year growth of 3.6 percent. This was the seventh consecutive month of growth deceleration since rising at a rate of 6.6 percent last March.GDP (4Q24, first print) will be reported Thursday. In the September quarter, real GDP increased 3.1 percent (SAAR). The Atlanta Fed’s GDPNow model is forecasting growth of three percent in the fourth quarter.Friday brings the employment cost index (4Q24) and personal income/spending (December).In the September quarter, private-industry total comp grew 3.6 percent from a year ago. In 2Q22, it was galloping ahead at a 38-year high of 5.5 percent. In the 12 months to November, headline and core PCE (personal consumption expenditures) grew 2.4 percent and 2.8 percent respectively. This was a four- and seven-month high, in that order. In 2022, these two measures were growing at four-decade highs of 7.3 percent (June) and 5.7 percent (February) respectively.WTI crude oil: Currently net long 316.7k, down 244.
Last week, after rallying for three straight weeks – and in four out of five – a shooting star appeared on the weekly. This week, West Texas Intermediate crude gave back 2.2 percent to $74.66/barrel.The crude went vertical from $69.33 hit on December 26 to $79.33 on the 15th this month. For months, WTI was rangebound between $71-$72 and $81-$82 before dropping out of it last September. The range was recaptured as soon as 2025 began. Sellers are showing up just under the range top.Oil bears are probably eyeing at least $72 in the near term. In the meantime, US crude production in the week to January 17 decreased 4,000 barrels per day week-over-week to 13.477 million b/d; output has come under pressure since registering a record 13.631 mb/d in the week to December 6. Crude imports increased 621,000 b/d to 6.7 mb/d. As did gasoline inventory which rose 2.3 million barrels to 245.9 million barrels. Stocks of crude and distillates, on the other hand, went the other way – respectively down one million barrels and 3.1 million barrels to 411.7 million barrels and 128.9 million barrels. Refinery utilization shrank 5.8 percentage points to 85.9 percent.E-mini S&P 500: Currently net short 75.7k, up 45.2k.
The first six sessions were shaky this month, with the S&P 500 ending last year at 5882 and dropping to 5773 by the 13th this month. Then, the large cap index reversed higher, ticking 6128 – a new intraday high – this Friday. Bulls, however, were unable to hang on to Friday’s gains, ending 0.3 percent lower to 6101. For the week, it added 1.7 percent.The S&P 500 peaked on December 6 at 6100. That high was decisively taken out on Thursday, although Friday’s opening strength petered out as the session progressed. For now, 6100 is key. Bulls have done a good job the last two weeks yet have not been able to rally the index convincingly past last month’s high. Should 6100 fail to hold, they are likely to try to defend 6010s.Euro: Currently net short 62.5k, up 2.1k.
The euro shot up 2.2 percent this week for a second consecutive up week. Last week, which was the first up week in seven – second in 11 and third in 16 – the currency reversed higher after tagging $1.0178 on the 13th.The euro fell sharply starting September 30 (last year) after facing rejection at $1.12 for six consecutive weeks.There was resistance at $1.03, which the bulls took care of as soon as the week began. By Friday, the 50-day moving average was recaptured, although resistance at $1.05, which goes back at least a decade, held. The euro rallied as high $1.0522 in the last session of the week but closed at $1.0488.Odds favor $1.05 gives way sooner than later. The daily is getting overbought, so it is possible the bulls, should they need to regroup, do so near $1.03.Gold: Currently net long 300.8k, up 21.4k.
Gold bugs are hammering on $2,802, which was the intraday high posted on October 30 (last year). This Friday, the metal rallied as high as $2,795, subsequently closing at $2,779/ounce, up 1.7 percent for the week. This was the fourth up week in a row.When gold reached its peak last October, it came in a gravestone doji week. This was then followed by two weeks of downward pressure during which the metal dropped to $2,542 by November 14. This time around, gold is hanging on to its gains – most of it anyway. This bodes well for a breakout in due course.For now, if the bulls lose $2,750s, there is trendline support from last November’s low at $2,650. After this, other support levels include $2,540s-50s and $2,440s-50s.Nasdaq (mini): Currently net long 18.5k, up 8k.
The next couple of weeks is hot and heavy with tech earnings. Microsoft (MSFT), Tesla (TSLA) and Facebook parent Meta (META) report their December quarter on Wednesday, while Apple (AAPL) will do so on Thursday. Amazon (AMZN) and Google parent Alphabet (GOOG) report the week after. Nvidia (NVDA) does not report its January quarter until February 26.Ahead of this, the Nasdaq 100 has rallied the last two weeks, approaching its intraday all-time high from December 16 when it ticked 22133. This week, the tech-heavy index stalled at 21900s Wednesday through Friday, with an intraday high of 21945 in the last session and a close of 21774.If this week’s hesitancy just under last month’s high is a sign of things to come and the index comes under pressure, then the bulls need to defend 20500s, which they used as a buying opportunity on the 13th (this month).Russell 2000 mini-index: Currently net short 21k, up 19.9k.
On the 13th, the Russell 2000 bottomed at 2159 – just under the 200-day at 2167 at the time. The rally that followed brought the small cap index to its 50-day at 2321 this Friday, with a session high of 2322.For the week, the index closed up 1.4 percent to 2308 – just above a one-month ascending channel and a falling trendline from November 25 (last year) when a new intraday high of 2466 edged past the prior high of 2459 from three years ago.It is healthy that the index closed the week above this dual resistance, but for now odds favor the 50-day remains intact.US Dollar Index: Currently net long 14.9k, up 2.1k.
The US dollar index suffered its first back-to-back down week since last September. It has had a massive rally since September 27 when it bottomed at 99.86, after having gone sideways just under 100 for several sessions, before rallying for 14 out of 15 weeks.Last week, it dropped 0.3 percent, this week 1.7 percent. Dollar bulls were unable to save horizontal support at 108, combined with the 50-day at 107.42.The weekly has tons of room to continue lower. There is decent support at 105.70s; the 200-day is at 104.56.VIX: Currently net short 28.1k, up 1.3k.
VIX acts like it could go either way, depending on which timeframe wins in the near term. If the weekly prevails, the volatility index is headed lower; if the daily wins out, it wants to rally.In the event VIX comes under pressure next week, volatility bulls can defend 13, which is where a rising trendline from last May rests, and still be fine and rally from there.Thanks for reading!More By This Author:4Q24 Earnings Season Begins
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