Tiho Brkan | Jul 30, 2014 05:11AM ET
Equities
Chart 1: Managers exposure towards equities is now “all-in” mentality!
Chart 2: Bullish sentiment isn’t euphoric, but complacency dominates
Chart 3: July is shaping up to be 1st major monthly outflow in two years
Cash & Bonds
Chart 6 & 7: Retail investors push cash exposure towards lower levels!
Chart 8: Managers further pressed their underweight bond exposure…
Chart 9: Fund inflows continue with corporate bonds near record highs
Chart 10: Despite this years powerful rally, funds aren’t positioned long!
This month’s commitment of traders reports shows that small speculators remain rather neutral in the Treasury Bond market. If we refer to the chart above, we can see that bearish bets really stood out in August 2013 and again in December 2013, both marking intermediate lows for the Long Bond. However, despite a very powerful recovery rally this year, speculators have not yet turned net long. This is quite puzzling in a similar way that is also seen in the Merrill Lynch FMS, where exposure to bonds has been falling despite rising prices.
Commodities
Chart 11: Fund manager exposure towards commodities has improved
Chart 12: Funds are getting out of Agricultural commodities in a hurry!
Chart 13: Agricultural sentiment surveys have completely collapsed!!!
I have been focusing on the extremely disliked and disowned grains sector on the blog in recent posts. As it currently stands, futures positioning as well as sentiment surveys are pointing to possibility that panic selling is very close to ending. Corn, Wheat and Soybeans are extremely oversold and over the last 3 months, have declined by 26.9%, 28.3% and 17.4% respectively. Even more importantly, many of these agricultural commodities are having some of the worst two year returns in decades. Corn is down 54% over the last 24 months, while Wheat has suffered a 42% loss within the same time period. At current depressed prices, it is hard to see farmers rushing out to build up global inventory levels in coming years. Therefore, keep a close eye on the price, as we could be very close to a bottom.
Currencies & PMs
Chart 14: USD has held support & might be ready for another leg up…
This month’s commitment of traders reports have shown a slight increase in positioning. This months custom COT total stands at $12.8 billion of net long contracts, compared to last months level of $10.9 billion of net long contracts. Majority of the bullish bets are coming from the Euro Dollar exchange rate pair, where speculators see further weakness for the European currency. According to the chart above, sentiment isn’t anywhere near extremes just yet, as we have Dollar shorts held against the Pound, Loonie, Aussie and Kiwi. As always, higher prices in the US Dollar Index will entice more speculators and trend followers to chase prices higher.
Chart 15: Japanese Yen is about to make a large move in either direction
Chart 16: Caution is advised as funds pile back into Precious Metals…
This month’s commitment of traders reports have shown substantial increase in Precious Metals net long positioning yet again. Gold COT stands 161,200 net long contracts (39.5% of OI) in the month of July, compared to last months level of 131,600 (33.5% of OI). In the Silver market, COT stands 58,300 net long contracts (35.9% of OI), compared to last months level of 42,900 (27.1% of OI). As we can clearly see in Chart 16, Gold is consolidating in a sideways pattern right now. While bulls have been piling into the sector and busy pushing prices higher, they have failed to push the price into higher highs pattern known as an uptrend. The current level of bullish sentiment is extremely high for a market that remains in a price downtrend, so I would advise caution right now. Obviously, I would change my mind on the current short term direction, if and when Gold was to break above $1,400 per ounce.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.