Founders: CTAs are very, very, short

The catalyst for a rally may be when stocks and bonds reverse meaningfully. They are short all Metals and Bonds heavily and are long Oil.

Good Morning.

CTAs are very very short. The catalyst for a rally may be when stocks and bonds reverse meaningfully. They are short all Metals and Bonds heavily and are long Oil.

We would not be surprised if a small short-covering rally started now, but are not getting emphatically bullish until buy season flows are imminent. It may be getting safe to “rent” metal futures for a quick pop.

( We are long bonds, short the dollar, and slightly long Gold.. looking for a 1-2 day reversal of events now that Oil has cracked for them)

In Premium: Look for the Uranium report today and the next (possibly the best) part of China’s Dilemma this weekend

This is TD’s Silver and Gold take

In precious metals markets, we saw signs of imminent selling exhaustion in silver markets. After all, CTA selling activity may now be running on fumes, with the next meaningful selling program requiring a break below the $19.50/oz range, only to spark limited selling activity before the cohort reaches its effective 'max short' position size. Meanwhile, a break north of $21.50/oz could kick off the first buying program as trend follower shorts are whipsawed once more.

Meanwhile, the global macro liquidity drain has been notably impactful for gold markets, as rising yields sap capital from all assets, but CTA selling activity is unlikely to accelerate above the $1800/oz mark.

At the same time, while the yellow metal's price is under pressure, it is also trading particularly strong against the aggressive price action in US yields, as strong central bank buying activity persists through August with +77t of buying activity from the official sector.

The risk of subsequent liquidations is highest in Shanghai, where traders have accumulated a bloated position size in gold and silver, and will come back from their holidays to substantial declines in prices.

Today:

1. JPMs Early Look

   Comparisons with historical bond sell offs, cheaper valuations & less extended positioning suggest a potential imminent end to the Treasury sell off

2. GSTrader 1 Recap with oil comment

3. GSTrader 2 - Top Stories

4. TS Lombard- well balanced bond market assessment

   Yields rising as the market continues to price in “higher for longer” Fed policy. If the FOMC hawks are right about the policy path, 10y yields above 6% are possible

5. GS- detailed oil comment

   We believe the selloff in Brent of 6% yesterday and 11% over the past week reflects three main factors, which we think will prove to be transitory.

6. TD CTA Report