Following futures positions of non-commercials are as of February 4, 2025.10-year note: Currently net short 707.7k, up 7.1k.
Friday, the University of Michigan consumer survey was published for February, and it was revealed that the respondents meaningfully raised their inflation expectations for the next year. Inflation a year from now was expected to come in at 4.3 percent, which was a full percentage higher than in January. One must go back to October 2023 to witness a similar month-over-month jump. The unexpected jump in inflation expectations reverberated throughout the markets in that session, as the 10-year treasury yield tacked on five basis points and equities slumped.Thus far, it is just a survey. It becomes a problem once this gets translated into people’s behavior, and companies start adjusting to it. Then, it potentially will not only impact the economy but also the monetary policy.Markets are adjusting to this new reality. Futures traders now have their money on one 25-basis-point cut this year, down from two just a couple of weeks ago. Literally no one expects a raise this year. For this to happen and for the Federal Reserve to justify this, there needs to be a drastic change in how the economy performs and how inflation behaves.As things stand, the economy is on a solid footing but shows no signs of overheating. Inflation, too, is down a lot from the 2022 highs but is proving sticky above the central bank’s target. Amidst this comes the new variable in all this: evolution of the Trump administration’s fiscal and tariff policies in the months and quarters to come. This is a big unknown – a known unknown – with the potential to reverberate through a whole host of assets. Fingers crossed!30-year bond: Currently net short 4.9k, up 33.5k.
Major US economic releases for next week are as follows.The NFIB optimism index (January) is due out Tuesday. Small-business sentiment in December rose 3.4 points m/m to 105.1. The index was 93.7 in October.Wednesday brings the consumer price index (January). In the 12 months to December, headline and core CPI increased 2.9 percent and 3.2 percent respectively – a five-month high and a four-month low, in that order. They respectively reached four-decade highs of 9.1 percent in June and 6.6 percent in September of 2022.The producer price index (January) is scheduled for Thursday. From a year ago in December, both headline and core wholesale prices increased 3.3 percent.Retail sales (January) and industrial production (January) will be published Friday.December retail sales grew 0.5 percent m/m to a seasonally adjusted annual rate of $729.2 billion – a record.Capacity utilization increased 0.8 percent m/m in December to 77.6 percent – a four-month high.WTI crude oil: Currently net long 215.4k, down 47.7k.
The week began with Monday’s unsuccessful attempt at reclaiming the 200-day moving average ($74.37), with the session high tagging $75.18. By the end of the week, West Texas Intermediate crude instead breached the 50-day ($71.83), closing the week at $71/barrel, down 2.1 percent.WTI for months has gone back and forth between $71-$72 and $81-$82 before dropping out of the range last September. The range was recaptured as soon as 2025 began, but sellers showed up mid-January at $79.39.Since a shooting star week four weeks ago, which showed up after rallying for three straight weeks, the crude has been under pressure the last three weeks.This Thursday, WTI ticked $70.43 before a modicum of buying interest showed up. This is an opportunity for oil bulls to put their foot down, especially considering the technicals are oversold on the daily. Inability to do so will open the door toward $67, which attracted bids several times going back to last September.In the meantime, US crude production in the week to January 31 increased 238,000 barrels per day week-over-week to 13.478 million b/d; output has come under slight pressure since registering a record 13.631 mb/d in the week to December 6. Crude imports, too, grew 467,000 b/d to 6.9 mb/d. As did crude and gasoline inventory which rose 8.7 million barrels and 2.2 million barrels respectively to 423.8 million barrels and 251.1 million barrels. Distillate stocks, on the other hand, went the other way – down 5.5 barrels to 118.5 million barrels. Refinery utilization firmed up one percentage point to 84.5 percent.E-mini S&P 500: Currently net short 4.8k, down 51.3k.
Equity bulls were sitting pretty until 10AM Friday when the aforementioned sentiment news hit the tape. Until then, the S&P 500 was up one percent for the week, tagging 6101 intraday. Since December 6 when it was hit the first time, 6100 has been an area of interest for bulls and bears alike. This is also where a falling trendline from January 24, when the large cap index peaked at 6128, lied. Plus, this approximates the underside of a broken trendline from October 2023. In the end, bulls were unable to take out this hurdle; by the time Friday’s session ended, the index gave back 0.2 percent for the week to 6026.For three months now, 6010s has provided support, with occasional breaches. Between the December 6 high and the low on January 13, the S&P 500 was down 5.4 percent, touching 5773 intraday. This has all been recouped – just about. At Friday’s high, the index was less than 27 points from its all-time high. But for now, the inability to rise to a new high the last two weeks can mean more downward pressure is the path of least resistance ahead.Euro: Currently net short 58.6k, down 8k.
The euro is testing horizontal support going back to early this year. On January 2, it tagged an intraday low of $1.0223, followed by $1.0212 on the 10th and $1.0178 on the 13th. This Monday, it fell to $1.0211 intraday before drawing bids, ending the week down 0.3 percent to $1.0328.If euro bulls can regroup near $1.03, a relief rally can occur. The currency fell sharply starting September 30 (last year) after facing rejection at $1.12 for six consecutive weeks.The problem is that horizontal resistance at $1.05, which goes back at least a decade, is holding. This week, the euro ticked $1.0443 intraday Wednesday before getting repelled at the 50-day ($1.0412).Gold: Currently net long 302.5k, up 3.1k.
Gold tried to unwind the overbought condition it was in by beginning with Monday’s intraday weakness ticking $2,802, and that was bought. This was a successful test of the prior highs of $2,802 posted on October 30 and $2,803 on January 29. By Friday, the yellow metal ticked $2,911 intraday – a fresh high – to end the session at $2,888/ounce. For the week, it jumped 1.9 percent. This was a sixth consecutive weekly gain.Momentum is strong, although the daily remains extended. Should weakness develop, gold bugs will be tested if they can defend $2,800. After this, there is support at $2,750s, and $2,540s-50s and $2,440s-50s after that.Nasdaq (mini): Currently net long 19k, down 11.7k.
The Nasdaq 100 eked out a weekly gain of 0.1 percent to 21491 but at one time was up as much as 1.8 percent for the week. Friday’s reversal can be blamed for both fundamental and technical reasons – the former being the aforementioned consumer sentiment regarding inflation and the latter being trendline resistance from December 16 when the tech-heavy index peaked at 22133.The 50-day – a stone’s throw away – likely gets tested next week. A breach of the average will make the index exposed to downward pressure toward 20500s, which is a must-hold for the bulls.Russell 2000 mini-index: Currently net short 27.5k, up 5.5k.
The Russell 2000 continues to remain stuck between 2260s and 2320s. The latter, which has attracted offers for three weeks now, induced selling in the latter half of the week, even as the small cap index closed the week just above 2260s, finishing the week down 0.4 percent to 2280.Near term, either way it breaks – either 2260s or 2320s – momentum likely follows.US Dollar Index: Currently net long 14.5k, up 339.
There was something for both the bulls and bears. Horizontal support at 107 was defended on both Wednesday and Friday. The US dollar index ended the week down 0.3 percent to 107.93. Concurrently, horizontal resistance at 110 held, as Monday’s intraday high of 109.75 was sold.The index has had a massive rally since September 27 (last year) when it bottomed at 99.86, after having gone sideways just under 100 for several sessions, before rallying in 14 out of 15 weeks and then dropping in three out of four. As things stand, it is stuck between 110 and 107. Odds favor a breach of 107 sooner than later.VIX: Currently net short 48.5k, down 915.
Once again, volatility bulls found it tough to persist north of 20, with Monday tagging 20.42 intraday but closing at 18.62. VIX then dropped the next three sessions before turning up on Friday, recapturing both the 50- and 200-day, which at 16.16 and 16.27 respectively, are converging. The volatility index closed the week up 0.7 percent to 16.54.The daily acts like it wants a higher print near term.Thanks for reading!More By This Author:Equity Bulls Welcome Weakness Emanating From DeepSeek And Tariff Jitters For Now
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