Short Side Becoming Statistically Crowded

$66 billion in new government promises will be auctioned next week. The short side of the trade is getting statistically ‘crowded’ from the retail money perspective. Retail money, often heralded by the media for their savvy, is notoriously bad at market timing. So bad, they often make an excellent contrarian indicator. A bullish technical trigger, yet to be generated, will pressure the unsuspecting shorts.

US TBd (20 Years +) and the Nonreportable Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


The decisive push by retail money has yet to be equally matched by the deep-pocketed players. This less than decisive money flow setup at this stage of the cycle could imply bearish hint that will manifest itself during the next cycle. Hints are subtle changes in the expected movements of capital that tend to go unobserved at the time and become obvious only in retrospect.

US TBd (20 Years +) and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


Headline: Treasury Five-Year Notes Advance as Bernanke Predicts Slow Growth in Jobs

Treasury five-year notes had the first back-to-back weekly gains since October as U.S. payrolls grew less than forecast and Federal Reserve Chairman Ben S. Bernanke said the labor market’s recovery will be gradual.

Yields on the notes touched the lowest level in two weeks yesterday after Labor Department data showed nonfarm payrolls expanded by 103,000 last month, versus a median forecast of 150,000 in a Bloomberg News survey. The Treasury will sell $66 billion in securities next week in the year’s first note and bond auctions.

Source: bloomberg.com