Morning Note: Futures Traders Remain Bullish on Commodities, Skittish on Stocks

Each week we review and record key (to us) components of the CFTC's commitment of (futures) traders report.

Here's what that looks like, with me highlighting for you the bottom line (signal) from the areas I featured in this week's notes:

FUTURES TRADERS NET POSITIONING… 5/15/2021

• SPX net short 36817 contracts i1w 

• Nasdaq net short 6011 contracts d1w   

• Russell 2000 net short 27784 contracts i1w

• 10-yr treas net long 1217 contracts i1w   

• VIX net short 87224k d1w 

• Gold net long 192K contracts i1w

• Silver net long 52846 contracts i6w

• Copper net long 45831 contracts d1w 

• Lumber net long 36 contracts, d1w

• Platinum net long 27267 contracts d2w

• Palladium net long 2781 contract d1w

• Oil net long 497k contracts d1w

• Nat Gas net short 65496 contracts d1w   

• Dollar net long 2423 contracts i1w

• Yen net short 41728 contracts i1w

• Euro net long 93907 contracts i3w

• Pound net long 28176 contracts i1w  

• Aussie net long 2416 contracts i2w    

• New Zealand dollar net long 9344 i4w

• Swiss Franc net short 2851 contracts i2w

• Canadian Dollar net long 38629 contracts i3w

• Mexican Peso net short 8480 contracts d5w  

• Brazilian Real net long 2513 contracts i1w

• Russian Ruble net long 5483 contracts d1w  

Note: 5/15/2021: (IMPLICATIONS):

SPX (SP500), after going net long for one week in late April (net short for the 6 weeks prior) is net short, more so this week, for the second consecutive week. Traders are skittish!

Treasury futures traders are barely net long after being barely net short last week. Call it neutral on expectations for rates near-term.

Nasdaq traders remain net short the 12th straight week, although to a notably lesser degree vs last week. Went from 160k net short to 60k. Still cautious, but less so.

Russell 2000 is hugely net short. Speaks to over-shooting among small caps and, I have to assume, less optimism over reopening oomph.

Gold net long jumped by 20k contracts after consolidating for 10 weeks. Speaks to positive setup for gold of late, as well as inflation and real rates expectations.

Silver net long continues to rise sharply (6 straight weeks). Speaks to optimism over reopening, industrial investment going forward, etc., as well as to the gold-like sentiment investors hold for the metal.

Copper net long dropped by 8k contracts. While still spells optimism, speaks to the huge run in price and China’s attempt to cool metals prices a bit of late.

Lumber net longs dropped notably, now nearly neutral. Speaks to the huge, unsustainable runup in price, and evidence of project delays and cancellations.

Dollar remains net long: Speaks to expectations for higher U.S. interest rates, reopening oomph, fear of fed-tightening, and, ironically, present fear of equity market valuations.

Aussie dollar net long for second consecutive week: Speaks to commodities demand and apparent lack of concern over riff with China.

Canadian dollar longs up hugely! Speaks to commodities demand, as well as present Canadian idiosyncrasies.

Brazilian Real net long for the first time since mid-2019: Speaks to commodities demand, and expectations for economic rebound in Brazil.

Clearly, futures traders remain bullish on commodities. As do we, longer-term...

Asian equities leaned slightly green overnight, with 9 of the 16 markets we track closing higher.

Europe's starting the week off positive, with 14 of the 19 bourses we follow trading higher so far this morning.

U.S. major averages, however, are struggling a bit to start the week: Dow down 129 points (0.37%), SP500 down 0.38%, SP50 Equal Weight down 0.33%, Nasdaq 100 down 0.66%, Nasdaq Comp down 0.48%, Russell 2000 down 0.40%.

The VIX (SP500 implied volatility) is up 9.57%. VXN (Nasdaq i.v.) is up 4.64%.

Oil futures are up 1.03%, gold's up 0.94%, silver's up 1.41%, copper futures are up 0.86% and the ag complex is up 0.36%.

The 10-year treasury is down (yield up) and the dollar is down 0.07%.

Led by AT&T, gold miners, base metals miners, uranium miners and MP (rare earth minerals miner) -- but dragged by ALB (lithium miner), solar stocks, Asia-Pac stocks, tech stocks and water infrastructure stocks -- our core portfolio is up 0.15% to start the session.

I began reading Peter Zeihan's Disunited Nations over the weekend and immediately found confirmation of one of the points I made in last week's main message; that any departure from global trade is indeed inflationary phenomena:

"...most of the world’s raw materials—whether iron ore or bauxite or lithium or copper—are produced on one continent, processed on another, and consumed yet somewhere else. Even minor interruptions to global shipping will collapse the availably of the base materials upon which modern life has been built."

Have a great day!

Marty