Traders trim cyclical bets

Still betting on further price gains though

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Constructing an aggregate of the CFTC positioning for typical cyclical trades, like oil and S&P 500 e-minis, shows that traders continued to trim their cyclical bets last week. That could be a sign the business surveys have peaked, although even if they drop back they would still point to strong growth.

Macro

The US University of Michigan Consumer Confidence Index rose by 1.6 points in April. There isn't much of a relationship between this measure and retail sales though, even before Covid hit.

US housing starts rose sharply to 1,739,000 annualized in March. Building permits increased to 1,766,000, though are still a bit lower than a couple of months ago.

A slump in exports caused the eurozone goods trade balance to fall to 1.9% of GDP in February.

Markets

We saw in a recent edition that lumber prices have jumped again. The CFTC data showed a big increase in positioning for lumber as well, where traders reduced their positioning in other cyclical commodities like copper.

So far at least, that means there has been a divergence between positioning and price for copper.

The sharp fall in US yields last week means the 10y-3m yield curve there is now similar to that in Canada.

The German Dax finished the week strongly, but none of the main European indices have made up much ground against the S&P 500 lately.

Although the VIX was little changed last week, the rise in the SKEW index, an indicator of perceived tail risk, could be a sign traders are getting nervous.

Finally, crypto seems to be the market to watch on Monday. Over the weekend, Bitcoin and Ethereum were down sharply.

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