At $30, the market's still long oil

Once more unto the breach, dear friends, as US markets re-open today.  Despite the holding pattern in European bourses yesterday, it certainly feels as if pessimism still reigns supreme; certainly there was little in yesterday's price action in crude oil to engender any confidence whatsoever.  Perhaps this week's earnings can stem the tide of despair, or maybe Mario Draghi can recover the magic beans that he seemed to have misplaced last month.   Failing that, it's hard to see where any good news may come from other than a short squeeze.

Going back to oil for a second, it was instructive to note how the rapprochement with Iran was taken as a "sell the fact" rather than "buy the fact" as one may have supposed.  While markets often bottom on bad news, it doesn't necessarily follow that bad news mandates a bottom.  It is very interesting to observe, for example, that the CFTC commitment of traders report still has non-commercial traders comfortably net long WTI futures:

To be sure, the position size has come down a lot, but it is still remarkable that it is long at all.   In fairness, the number of shorts is at a record high, having spiked recently; while that could well serve as a prelude to a squeeze, it does make sense to ask who is likely to have an itchier trigger finger: the guy who's been short for the last $20, or the guy who's been long for the last $70?

On a technical note, Macro Man also looked at the dis-aggregated report from the CFTC.  He's ashamed to admit that he could not make the numbers reconcile with the standard COT report, or whether that is even possible.   Regardless, the message is largely the same: swap dealers, managed money, and "other reportables" all register net long positions in WTI.  Even the little guy, the non-reportables, have been buying the dip in their Interactive Brokers accounts; net WTI longs registered their highest reading in more than a year in last Friday's report.

Perhaps the evolution of "long-only" commodity holdings such as pension allocations or ETFs is responsible for the skewed net reading on crude futures (Macro Man calculates the holdings of the USO ETF to be ca. 95,000 futures, more than half of the non-commercial net long).  Certainly the fact that shorts have increased dramatically renders a squeeze somewhat more likely, if only temporarily.   But to generate proper capitulation and form a tradeable bottom, is it really too much to ask for speculative positions to actually go short?

Elsewhere, Chinese GDP data actually came in a bit lighter than expected last night, with the y/y reading printing 6.8% (versus a 6.9% expectation) and the q/q reading printing 1.6%, below the consensus of 1.8%.  One can take this one of two ways:  on the one hand, you could say that the authorities must be feeling confident about the measures they've taken if they're allowing such important figures to show a bit of weakness.  The other, more cynical (or shall we say realistic?) explanation is that things are so bad that they couldn't massage the figures up to expectation even with a full toolbox of chicanery.  Certainly Macro Man's growth indicator would vote for the latter explanation....

At the time of writing, S&P futures are trading higher, though the experience of the past couple of weeks suggests that this recovery could prove as ephemeral as the unfortunate daffodils currently trying to grow in Macro Man's front garden.  Perusing the comments section and other financial commentary over the weekend, Macro Man has the sense that people are a) generally quite bearish, and b) feel that there remains a fair amount of complacency in the market.

Macro Man has therefore decided that that time has once again come to tap into the wisdom of crowds, but this time with a twist.  In addition to asking for your forecasts for the SPX and oil, he also wishes to know what you think the market forecasts for these assets...i.e. your belief of what the aggregate risk taker expects for those assets.  Who knows...perhaps all those guys who shorted crude will vote for negative prices!