Following futures positions of non-commercials are as of November 6, 2018.
10-year note: Currently net short 539.2k, up 36.3k.
In January, the 10-year Treasury rate broke out of 2.62 percent. Then in September, it took out 2.95 percent, followed by a break out of 3.11 percent early October. Things could not evolve any better for bond bears – breakout, sideways/digestion, and breakout again. Once again, yields are attempting another breakout.
On October 5, the 10-year (3.19 percent) began retreating after touching 3.25 percent – the highest since May 2011. This Thursday, it rallied to 3.24 percent, before coming under slight pressure. Near term, yields are likely to come under pressure, and that likely sets up a bond bull-bear duel. On the 26th last month, the 10-year found support just under the daily lower Bollinger band, which now lies at 3.08 percent. The 50-day (3.1 percent) is right above. This area also amounts to breakout retest of 3.11 percent.
30-year bond: Currently net short 71.2k, down 10.8k.
Major economic releases next week are as follows.
The NFIB optimism index for October comes out Tuesday. Small-business optimism fell nine-tenths of a point in September from August’s record 108.8.
The consumer price index for October is due out Wednesday. In September, both headline CPI and core CPI inched up 0.1 percent m/m. In the 12 months to September, they respectively rose 2.3 percent and 2.2 percent.
October’s retail sales are on tap Thursday. Sales grew 4.7 percent year-over-over in September to a seasonally adjusted annual rate of $509 billion.
Friday brings industrial production (October) and the Treasury International Capital data (September).
Capacity utilization in September increased 3.2 percent y/y to 78.1 percent. In the current cycle, utilization is yet to break 80 percent. In November 2014, it reached as high as 79.6 percent.
On a 12-month rolling total basis, foreigners in August purchased $16.4 billion in US equities, much weaker than $135.7 billion in January.
Crude oil: Currently net long 458.8k, down 45.4k.
Spot West Texas Intermediate crude ($60.19/barrel) fell in every single session this week. That was also the case last week. From October 3, it fell from $76.90 in nearly a straight fashion, losing one after another support. Friday, as it dropped to $59.26 intraday, it just about tested a rising trend line from February 2016. Back then, the crude bottomed at $26.05, before beginning a multi-year rally until the high of early last month. This is a make-or-break support for oil bulls. Daily momentum indicators are extremely oversold. In the event of a rally, broken-support-turned resistance rests at $64-plus.
