1. There were three significant gross position adjustments by speculators in the CFTC reporting week ending September 29. Another 10.2k short yen contracts were covering, leaving 61.8k contracts, the lowest since May. Speculative positioning in the Mexican peso accounts for the other two significant adjustments. Essentially the longs switched to shorts. The gross long position was cut by a third of 16.4k contracts (leaving 31.3k), and the gross short position rose by 15.7k contracts (to 75.7k).
2. To the extent there was an overall pattern, it was the trimming of gross long positions. There were two exceptions. The gross long sterling position increased by 4.8k contracts to 49.8k. The gross long Australian dollar position rose by 1.9k contracts to 44.6k. The gross short position adjustment was evenly mixed among the eight currency futures we track.
3. The rise in the gross long sterling position was overwhelmed by the 8.1k contract increase in the gross short position. This was sufficient to turn the net position back to the short side (-2k contracts) after one week net long.
4. The net 10-year US Treasury futures position (among speculators) switched to the long side for the first time since late-August. It now stands at 22.5k contracts after having been short a net 8.5k the previous reporting week. It is a function of 458.6k gross long contracts, which rose 10% of 44.7k contracts in the latest period. The gross short position rose by 13.7k contracts to 436.1k.
5. Speculators took liquidated 7.7k contracts of oil futures, leaving the bulls with 481.5k contracts. The bears left their position unchanged with 229.8k short contracts. The net position then reflects the gross long adjustment, falling 7.7k contracts to 251.7k.
A bad report,? Yessiree Bob. The end of the world? Certainly not
An Oct hike has all been priced out from October now, according to the futures market. The chances of an Dec hike have fallen to 30% from 44%. January 2016 was a hot favourite for a hike but that’s now been priced to March
As for the numbers today, that’s two big misses in a row and bad revisions. That strikes down the one off factor
So why shouldn’t we panic?
I spouted on about the strength in the jobs market in my preview and like everything, nothing lasts forever. That goes for trends. There’s no signs that the jobs market is going backwards, it’s just running out of strength. We’ve seen that in the data regarding employment. The UK is a perfect example of a strong run petering out. Our positive is that wages are still rising even as the drop in the claimant count has stopped.
For the US, wages are still weak and that’s the big issue here
Glencore has issued a public statement stressing that it remains “operationally and financially robust” following a rocky week for the miner and commodity trading giant, whose shares fell almost 30 per cent on Monday but staged a rebound yesterday.
Echoing a message sent out to the Australian media on Tuesday, Glencore said in a statement to the London stock exchange:
Glencore has taken proactive steps to position our company to withstand current commodity market conditions.
Our business remains operationally and financially robust – we have positive cash flow, good liquidity and absolutely no solvency issues.
We are getting on and delivering a suite of measures to reduce our debt levels by up to $10.2 billion.
Glencore has no debt covenants and continues to retain strong lines of credit and secure access to funding thanks to long term relationships we have with the banks.
We remain focused on running efficient, low cost and safe operations and are confident the medium and long-term fundamentals of the commodities we produce and market remain strong into the future.
Now that after long last the market has turned its attention not only to Glencore’s mining operations, which as we have repeated said are a secondary aspect to the company’s business model, the key being its trading operations which transact in billions of commodities every single day, and the stocks just plunged to fresh intraday lows down a historic 30%, here is a quick pointer at what traders should be looking at next: the company’s own disclosure on counterparty risk from its most recent annual report.
But before we get into it, here is a reminder of Glencore’s most recent disclosed financial situation: $30Bn net debt on $6.5bn in EBITDA. EBITDA, which as a reminder, drops by $1.2BN for every 10% drop in copper prices according to the company itself.
So here is what “could go wrong” form the horse’s mouth. First on counterparty credit in a world of plunging commodity prices:
1. Discipline, while necessary for success, is never sufficient. Discipline does not substitute for skill, talent, and insight. Strict, disciplined adherence to mediocre plans can only lock in mediocre results. If it were otherwise, there would be no losing automated trading systems.
2. It is not enough to find an “edge” in financial markets; as any tech entrepreneur can attest, competitive advantages are perishable commodities. Those who sustain success continually renew themselves, uncovering fresh sources of competitive advantage. That requires processes for assessing and challenging our most basic assumptions and practices. It takes a good trader to create success, a great one to recreate it. Nothing is quite as difficult— and rewarding— as letting go of what once worked, returning to the humble status of student, and arising phoenix-like from performance ashes.
3. This productivity is readily apparent on a day-to-day, week-to-week basis: The greats simply get more done than their colleagues. They organize their time and prioritize their activities so that they are both efficient (get a lot done per unit of time) and effective (get the right things done). How much time do we typically waste as traders, staring unthinkingly at screens, chatting with people who offer little insight, and reading low-priority/ information-poor emails and reports? The successful traders invariably are workhorses, not showhorses: They get their hands dirty rooting through data and make active use of well-cultivated information networks.
4. Successful traders I’ve known work as hard on themselves as on markets. They develop routines for keeping themselves in ideal states for making trading decisions, often by optimizing their lives outside of markets.
5. This, for me as a psychologist, has been one of the greatest surprises working with professional money managers: The majority of traders fail, not because they lack needed psychological resources but because they cannot adapt to what Victor Niederhoffer refers to as “ever-changing cycles.” Their frustration is a result of their rigid trading, not the primary cause. No psychological exercises, in and of themselves, will turn business around for the big-box retailer that fails to adapt to online shopping or the gaming company that ignores virtual reality. The discipline of sticking to one’s knitting is destined for failure if it is not accompanied by equally rigorous processes that ensure adaptive change.
With each passing day this year, agriculture seems to be sagging and so is the Indian farmer. Deficit monsoon rains appear to be the trigger. Although rains offered some respite to Marathwada, the situation in India’s largest agri-state, Uttar Pradesh, has gone from bad to worse. Last year’s drought, with monsoon rains falling short of the long period average(LPA) by 12 per cent, saw foodgrain production fall by close to 5 per cent. This year, with an almost similar rain-deficit, the likely damage is anybody’s guess. The average agri-GDP growth in the first four years of the 12th Five-Year Plan is going to be below 2 per cent, way below the target 4 per cent. Lower growth is causing increased farmer distress and rising suicides. With agriculture still engaging almost half of India’s labour force, any political party that brushes it aside will do so at its own peril. The Narendra Modi sarkar seems to be losing the pulse of the Indian farmer. We want to focus on real pulses, which are significant sources of protein to the Indian population. This year, pulses prices are going through the roof. The government appears optimistic, but traders are not. Tur/ arhar (pigeon pea) prices on September 18 hovered between Rs132 per kg in Delhi to Rs142 per kg in Raipur, with Mumbai, Kolkata and Chennai falling within this range. Compared to the same date last year, this amounts to an increase of 69 per cent in Delhi and 114 per cent in Raipur, with Mumbai at 73 per cent, Chennai at 74 per cent, and Kolkata at 78 per cent.
1. The first bucket we look at consists of the euro, Swiss franc, and sterling. These currencies saw only minor gross position adjustments. The 5.3k cut in gross long franc positions was the only gross position adjustment of more than 3.2k contracts. However, the minor adjustments were sufficient to swing the net sterling position long for the first time since the last week in August. After spending one-week net long, speculators swung back to hold a small net short position in francs.
2. The second bucket is the yen. Both bulls and bears were active. The gross long position rose 11.8k contracts to 48.3k. The gross short position grew by 8.7k contracts to 72/0.
3. The third bucket is the dollar bloc. There were two substantial (10k contracts or more) gross position adjustments. The bulls are picking a bottom by increasing their gross long position by 124k contracts to 40.9k. The bears are not convinced, and added 3.7k contracts to their gross short position, raising it to 79.3k. The Aussie bulls chopped their gross long position by 16.5k contracts to 42.7k. The gross short position was trimmed by 4.3k contracts.
4. The fourth bucket is the Mexican peso. Speculators began turning around their net short position. The gross long position more than doubled by jumping 25.9k contracts to 47.6k. A little more than 17k short contracts were covered, leaving 60k. The net short position fell to 12.4k from 55.3k contracts.
5. The net short 10-year US Treasury position was reduced to 8.5k contracts from 39.5k. This was the result of new speculative longs being established (33.7k contracts). Gross shorts were increased by 2.8k contracts.
6. The net long speculative light sweet crude oil futures position rose by 20k contacts to 259.4k. This was largely the result of 16.7k gross short contracts being bought back. The gross long position rose by 3.4k contracts (to 229.8k)
1.) When it comes to trading, it turns out that the skills we learn to earn high marks in school, advance our careers and create relationships with other people, turn out to be inappropriate for trading. Traders must learn to think in terms of probabilities and surrender all of the skills acquired to achieve in virtually every other aspect of life.
2.) Within 9 months of moving to Chicago, I had lost nearly everything I owned. My losses were the result of both my trading activities and my exorbitant lifestyle, which demanded that I make a lot of money as a trader.
3.) You don’t need to know what’s going to happen next to make money. Anything can happen. Every moment is unique, meaning every edge and outcome is truly a unique experience. The trade either works or it doesn’t.
4.) More or better market analysis is not the solution to his trading difficulties or lack of consistent results. It is attitude and “state of mind” that determine his results. A winner’s mindset means learning how to think in probabilities.
5.) The edge means there’s a higher probability of one outcome than another. The greater your confidence, the easier it will be to execute your trades.
6.) Do you ever feel compelled to make a trade because you are afraid that you might miss out?
1. There were six significant (10k+ contracts) gross speculative positions in the Commitment of Traders reporting week ending September 15. The speculators cut their gross long euro holdings by 12.3k contracts (~16%) to 63.4k contracts. They slashed their gross long yen position by 26.7k contracts (~42%) to 36.4k contracts.
Speculators boosted their gross long Swiss franc position by 13.5k, giving them 19.9k contracts (and enough to swing the net position to the long side for the first time since late July. It was the largest percentage term jump in the gross longs in a little more than two years. Speculators also nearly doubled their gross long New Zealand dollar position. It rose by 10.6k contracts to 22.5k.
Speculators covered 14.3k short sterling contracts, leaving 46.8k. They also covered 16.8k short Mexican peso contracts. They retained 77k gross short contracts.
4. Adding the New Zealand dollar futures to our currency matrix, we tracked 16 gross speculative positions. In the past week all but five were reducing exposures. It appears the specs are trying to pick a bottom to the Aussie and Kiwi. Speculators were lightening up on long euro and yen exposure into the rally. Speculators began covering short sterling positions as the nine-day losing streak ended on September 4, though they were not inclined to bottom fish (extend gross longs).
The speculative net short 10-year Treasury futures position grew for the third consecutive week, rising to 39.5k contracts from 23.9k. This is despite the covering of 12.k gross short contracts (to 419.6k). The bulls were more aggressive, liquidating 27.7k contracts (to 380.1k).
6. Similarly in the oil futures, speculators reduced their exposures. The longs were shaved by 4.3k contracts (to 485.8k) and the shorts were slimmed by 12.3k contracts (to 246.4k). This resulted in an 8k increase in the net long position to 239.4k contracts.