US STOCKS: S&P Drifts Lower, Is Dow Transports Telling Us Anything ?
The ESU5 overnight range was 6396.25 - 6442.50, Asia is currently trading around 6410. The September contract drifted lower as some risk was taken off heading into a big week. This morning has seen US futures open slightly higher, ESU5 +0.05%, NQU5 +0.10%. The animal spirits remain strong even though price is looking stretched. While above the 6230/50 area dips will probably continue to be supported, a break below this support is needed to signal a possible correction. There is lots of event risk coming up this week and we are heading into month-end so caution is warranted. Some warning signs around potential volatility overnight were 30-Year yields down 10bps(4.86%) & Down Transports -2.3%.
- Lance Roberts(RIA) - “Historically speaking, the market has traded above the 20-DMA for a long stretch in concert with the chart above. Again, this chart does not mean the market will crash, but a correction below the 20-DMA is becoming more likely. Another reason we expect volatility to increase is that we are entering a seasonally weak period in the market, which corresponds with periods of increased volatility.” See Fig.1 Below.
- “The market will be paying close attention to the earnings announcements from AAPL, META, GOOG, and MSFT this week particularly in the AI CapEx discussions. That will be more important than the actual earnings announcement.”
- The Kobeissi Letter on X: “A massive short squeeze is underway: The 5-day moving average of net call volumes for the most shorted stocks jumped to ~4.2 million, the 2nd-highest on record. That’s nearly in line with the peak levels seen during the 2021 meme stock mania. Call volume for the most shorted names has QUADRUPLED over the last few weeks. Shorts are being liquidated.” See Fig. 2 from HEDGEEYE Below.
- Guy LeBas on X: “Jokes aside, I think market is underpricing a really weak July NFP print Fri. In June, there were ~+70K public education jobs created, many of which were seasonal adj artifacts from late end to school year in CA, NY, and a few other states. If those do reverse in Jul, NFPs would be ~0K.”
- Andreas Steno Larsen on X: “The US has got the softest inflation surprises on Earth. That should impact the FOMC tomorrow.”
Fig 1: S&P Days Above 20-DMA
Source: MNI/RIA
Fig 2: Consensus SPX Shorts Trapped
Source: MNI/@KeithMcCullough/HEDGEEYE
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JGBS: Slightly Cheaper, US Tsys Slightly Mixed With Steepening bias
In Tokyo morning trade, JGB futures are weaker, -18 compared to settlement levels.
- (Bloomberg) -- Inflation adjusted Japan existing home sales average price NSA rose 5.5% in March from the same period last year, according to Bloomberg calculations using official data.
- (Bloomberg) -- Japan’s industrial production rose less than expected in May, missing analysts’ estimates as the US tariffs hit the nation’s exports. Factory output increased 0.5% from the previous month, the Industry Ministry reported Monday. Economists had expected a 3.5% gain. Output fell 1.8% from a year earlier, missing expectations of a 1.6% rise.
- Cash US tsys are slightly mixed, with a steepening, in today’s Asia-Pac session after Friday’s modest losses.
- Cash JGBs are ~1bp cheaper across benchmarks. The benchmark 10-year yield is 0.9bp higher at 1.447% versus the cycle high of 1.596%.
- Swap rates are ~1bp higher.
FOREX: AUD Sold Per CFTC, USD Selling By Leveraged Players Evident Elsewhere
The CFTC positioning update for the week ending June 24th showed a shift against the USD, particularly in terms of leveraged investors (albeit for the A$). Asset managers were more mixed in terms of the weekly shift.
- Net selling of the A$, by both leveraged players and asset managers was a standout last week. Both investor bases remain net short the A$. Given generally positive AUD/USD momentum, such flows may be to play for AUD underperformance on key crosses rather than against the USD.
- Leveraged investors added notably to net longs for JPY, EUR and GBP. CAD shorts were also reduced.
- In the asset manager space, aggregate shifts for JPY and EUR weren't large, but net shorts for GBP were added too.
- For NZD, we saw asset managers add longs. At +12k, net longs for this segment is a clear contrast to the still meaningful short asset managers are running with for the AUD.
Table 1: CFTC FX Positioning By Currency & Investor Type
| Leveraged Contracts | Asset manager Contracts | |||
| Weekly Change | Outright Position | Weekly Change | Outright Position | |
| JPY | 7301 | 15935 | -1627 | 93003 |
| EUR | 13536 | 11534 | 3479 | 360688 |
| GBP | 11240 | 45408 | -6974 | -15114 |
| AUD | -5251 | -22963 | -5129 | -36937 |
| NZD | 279 | -11981 | 6322 | 12195 |
| CAD | 4259 | -29077 | 6742 | -26085 |
| CHF | 1639 | 3545 | -930 | -36787 |
| MXN | -2794 | -10542 | 207 | 37986 |
Source: Bloomberg Finance L.P./CFTC/MNI
US TSYS: Cash Open
TYU5 is trading 111-25, down 0-01 from its close.
- The US 2-year yield opens around 3.742%, down 0.01 from its close.
- The US 10-year yield opens around 4.2825%, up 0.1 from its close.
- MNI FED BRIEF: MN Fed Kashkari Sees Two Rate Cuts This Year. Federal Reserve Bank of Minneapolis President Neel Kashkari said Friday he sees two interest-rate cuts as likely this year, with the first potentially in September, but he maintained that policymakers should remain flexible in case inflation from tariffs take longer to appear. "Since March, we have seen much larger than expected tariffs announced and then modestly pulled back, suggesting that an inflation boost is likely coming. At the same time actual inflation data indicate renewed progress toward our inflation target," he wrote in a blog.
- The 10-year yield has accelerated through its support, this should clear the way for a move lower with the 4.10% area the first target. 10-year yields should now find demand on any bounce back to the 4.35/40% area.
- Data/Events: MNI Chicago PMI, Dallas Fed Man. Activity
