Commitment of Traders Report 29Sep23
Derivatives positioning in the most important equity, fixed income, FX and commodity markets
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The following notable developments have occurred since August 25, the last time I shared an update on the COT report:
S&P net longs have increased moderately which suggests that traders have bought the dip we have seen this month. They have done the same for the NASDAQ which has increased from neutral to bullish positioning. This is not alarming, but it increases tail risk a bit.
Explicit short volatility bets in the VIX have increased. Traders seem to have taken advantage of this dip to underwrite downside risk. However, these bets remain below alarming levels.
Traders have continued to buy USD against EUR, JPY and GBP. The US economy remains robust, on path to grow 5% in real terms this quarter.
Given the mind-boggling sell-off in treasury securities, fixed income futures and options markets are the most exciting market segment to observe at the moment. Traders remain long US treasuries at all tenors. This positioning is by and large consistent with the latest Bank of America Fund Manager Survey. The most important macro question right now is whether or not the bond market turmoil is a buyable dip and whether it will spill over into equity markets. It’s challenging to opine on this matter. But I am afraid the most plausible conclusion might be that we will have to see a capitulation of bond investors before yields can come back down. That is clearly not yet happening. The odds favor more pain for them in my view.
Long exposure to non financial underlyings remains low across the board, including copper, gold, bitcoin, corn, wheat and soybeans. Interestingly, oil exposure seems to be fairly close to neutral levels. I can imagine that the most recent oil price pump will end soon.
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