Commodities Weekly Sentiment Tracker

Note: Using the z-score in the tables below as a coefficient of variation for standard error helps us flag the relative market positioning of the commodities in the CRB Index. It is not intended as a predictive signal for the reversion to trailing twelve month historical averages. For week-end price data, please refer to “Commodities: Weekly Quant” published at the end of the previous week. Feel free to ping us for additional color.    



1.       CFTC Net Futures and Options Positioning CRB Index: The Commodities Futures Trading Commission (CFTC) releases “Commitments of Traders Reports” at 3:30 p.m. Eastern Time on Friday. The release usually includes data from the previous Tuesday (Net Positions as of Tuesday Close), and includes the net positions of “non-commercial” futures and options participants. A “Non-Commercial” market participant is defined as a “speculator.” We observe the weekly marginal changes in the overall positioning of “non-commercial” futures and options positions to assess the directionally-biased capitulation risk among those with large, speculative positions.

  • The SUGAR, SILVER, and GOLD markets experienced the most BULLISH relative positioning changes week-over-week
  • The SOYBEANS, WHEAT, and COCOA markets experienced the most BEARISH relative positioning changes week-over-week

Commodities Weekly Sentiment Tracker - chart1 sentiment

Commodities Weekly Sentiment Tracker - chartx


2.       Spot – Second Month Spread: Measures the market expectation for forward looking prices in the near-term.

  • The RBOB GASOLINE, LEAN HOGS, CORN markets are positioned for HIGHER PRICES near-term
  • The LIVE CATTLE, HEATING OIL, and ORANGE JUICE markets are positioned for LOWER PRICES near-term

Commodities Weekly Sentiment Tracker - chart2 spot 2nd month spread


3.       Spot – 1 Year Spread: Measures the market expectation for forward-looking prices between spot and the respective contract expiring 1-year later.

  • The NATURAL GAS, WTI CRUDE OIL, and BRENT CRUDE OIL  markets are positioned for HIGHER PRICES in 1-year  
  • The LIVE CATTLE, COCOA, and SOYBEANS markets are positioned for LOWER PRICES in 1-year  

Commodities Weekly Sentiment Tracker - chart3 spot 1yr spread


4.       Open Interest: Aggregate open interest measures the amount of opened positions in all actively traded futures contract months. Open interest can be thought of as “naked” or “directionally-biased” contracts as opposed to hedgers scalping and providing liquidity. Most of the open interest is created from large speculators or participants who are either: 1) Producers/sellers of the physical commodity hedging their cash market exposure or 2) Large speculators who are directionally-biased on price.


Commodities Weekly Sentiment Tracker - chart4 open interest


Ben Ryan


CHART OF THE DAY: The YTD Market Scoreboard (Got $TLT?)

CHART OF THE DAY: The YTD Market Scoreboard (Got $TLT?) - 02.02.15 chart


Editor's note: This is a brief excerpt from today's Morning Newsletter written by Hedgeye CEO Keith McCullough.


I play for the team that likes the Long Bond more than the Dow in 2015 – here’s the breakdown of the YTD score:


1. Dow Jones Industrial Index down -2.9% last week to finish JAN -3.7%

2. SP500 down -2.8% last week to close JAN down -3.1%

3. S&P Financials (XLF) down another -3.2% last wk to finish JAN -7.1% (worst S&P Sector)

4. S&P Utilities (XLU) -1.7% wk-over-wk to close JAN up +2.3% (best S&P Sector)

5. Long-term Treasuries (TLT) +10% YTD (pre interest payment) #timestamped


GDP #Patriots

“The truth was incredible enough.”

-Glenn Beck


“It was so incredible, in fact, that a strange thing happened after it was reprinted in newspapers from coast to coast… The public didn’t believe it.” (Dreamers and Deceivers, pg 19)


In a riveting account of how former US President Grover Cleveland kept both his sickness and surgery a secret, in the aforementioned quote Beck describes America’s reception to investigative journalist, E.J. Edwards, discovering the #truth.


What was the #truth about US economic growth in both December and Q4 of 2014? It slowed. As growth slowed and #deflation expectations took hold, the #truth is that investing in the Long Bond (TLT) instead of late-cycle stocks got you paid.


GDP #Patriots - TLT cartoon 01.26.2015 normal


Back to the Global Macro Grind


In stark contrast to this historical metaphor of groupthink in trusting officialdom in the late 19th century, I’m thinking that if you told most Americans that year-over-year growth in US GDP is closer to 2% than it is 5% - they’d believe you.


Most upstanding humans believe in those who fight for the #truth every day too. While there used to be a lot more of them in the US financial media, they call them #Patriots – “a person who vigorously supports their country and is prepared to defend it.”


My congratulations to the New England Patriots for winning another Super Bowl. Whether you like the man or not, I think you have to respect Tom Brady’s team leadership. The man is all about the team and the system he plays for; not about himself.


I play for the team that likes the Long Bond more than the Dow in 2015 – here’s the breakdown of the YTD score:


1. Dow Jones Industrial Index down -2.9% last week to finish JAN -3.7%

2. SP500 down -2.8% last week to close JAN down -3.1%

3. S&P Financials (XLF) down another -3.2% last wk to finish JAN -7.1% (worst S&P Sector)

4. S&P Utilities (XLU) -1.7% wk-over-wk to close JAN up +2.3% (best S&P Sector)

5. Long-term Treasuries (TLT) +10% YTD (pre interest payment) #timestamped


Academics like to talk about what was “causal” in driving performance numbers. I like to write about what is. There is very little to no evidence to refute that a slowing in the rate of change in both growth and inflation isn’t bad for certain macro investing styles and exposures – and very good for others.


Since Long-term Bond Yields had been front-running this Q4 GDP #slowing news since December, last week was more of an exclamation point than it was a new sentence about what actually happened in the US economy:


1. US 2yr Yield was down -3 basis points on the week, but are already down -21bps (-31%) YTD

2. US 10yr Yield was down -15 basis points wk-over-wk, but are already down -52bps (-24%) YTD

3. Yield Spread (10yr minus 2yr) compressed another -12bps last wk to -31bps (-21%) YTD


This is why it should surprise no one who is bearish on bond yields that:


A) US Regional Bank Stocks (KRE) are even worse than XLF at -9.5% YTD

B) US REIT Stocks (VNQ) are crushing it at +6.8% YTD (pre dividends)


Yep. It’s all the same macro trade. If you got the direction of both growth and inflation right, you got bond yields right (and everything that correlates positively/negatively in either equity style factors and/or asset allocations right).


What’s next?


First, have a #process that allows you to embrace the uncertainty of each and every centrally planned market day. Second, be prepared for a short-term correction in what’s been nothing short of a parabolic move in the USD vs. other devalued currencies.


Yep, that’s the other thing that happened as the US Dollar stopped going up at an accelerating rate last week. Some of the extreme correlation trades (CRB Index and Oil vs USD) went the other way:


1. CRB Commodities Index +1% last wk to -4.8% YTD

2. WTI Oil +4.5% last wk to -11.3% YTD


So just take the time to observe Mr. Macro Market’s message (i.e. don’t try to force a pass at the goal line when you have time to run the ball). As #Patient GDP Patriots, I’m confident we can intercept hurriedness, and capitalize on the other team’s mistakes.


Our intermediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.65-1.79%


Dow 17,032-17,410

USD 94.51-95.98

Oil (WTI) 43.61-48.34

Gold 1


Best of luck out there this week,



Keith R. McCullough

Chief Executive Officer


GDP #Patriots - 02.02.15 chart



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TWTR: Thoughts into the Print (4Q14)

Takeaway: We remain Short on expectations for sharply decelerating 2015 revenue growth, but somewhat cautious into the print.


  1. 2015 WILL BE A CHALLENGE: We’re expecting 2015 revenue growth of 51% vs. consensus of 66%.  Outside of the obvious World Cup comp headwind in 2Q15/3Q15, we suspect TWTR’s largest source of revenue growth since 3Q13 (Ad monetization) will be under pressure with the 2Q13 Supply Shock largely in the rearview mirror.  Further, efforts to reignite that growth driver could push its users away.
  2. BUT WE'RE SOMEWHAT CAUTIOUS INTO THE PRINT: First, we're not sure how TWTR will approach guidance (lower the bar vs. hope for the best).  Second, it wouldn't take much user growth to produce an accelerating y/y growth rate for US MAUs given an easy y/y comp and the embedded aesthetic tailwind from third-party/automated accounts.  That alone could refuel optimism on a beaten-up stock.  However, we suspect any near-term upside would be short-lived.



We’re expecting 2015 revenue growth of 51% vs. consensus of 66%.  In addition to the obvious World Cup comp headwind in 2Q15/3Q15, we suspect TWTR’s largest source of revenue growth since 3Q13 (Ad monetization) will be under pressure as well.  


We had previously laid out our analysis which suggested that TWTR’s monetization strategy has been driven by surging ad load more than anything else.  In short, we believe that the reported change in TWTR’s ad engagements is a proxy for increasing ad supply, since ad engagements and ad pricing are almost perfectly inversely correlated. 


For more detail, see the link below


TWTR: What the Street is Missing

05/19/14 09:09 AM EDT

[click here]


Back in 2Q13, TWTR experienced its sharpest q/q increase in ad engagements alongside is sharpest q/q decline in ad pricing; collectively what we refer to as the “2Q13 Supply Shock” , which had propelled TWTR’s y/y revenue growth through 1H14.   


TWTR: Thoughts into the Print (4Q14) - TWTR   2Q13 Supply Shock


However, the rate of ad engagements has essentially slowed to pace of overall user activity on the site (global timeline views).  We initially thought that TWTR had slowed the pace of ad load increases, but it could be that users have started to fade TWTR’s ads at an increasing pace. 


If the latter is the case, TWTR would need to increase ad load at a disproportionately higher rate to receive the same level of engagement.  However, that creates the risk of pushing its users away; the perverse inverse relationship between TWTR's ad engagements and US MAUs suggests as much. 


TWTR: Thoughts into the Print (4Q14) - TWTR   Ad vs. user engagement 3Q14 2 

TWTR: Thoughts into the Print (4Q14) - TWTR   Ad Load vs. US MAUs 3Q14


but we're somewhat cautious into the print

First, we're not sure how management will approach guidance.  TWTR could guide high and hope for the best, especially since it recently raised $1.8B ($3.6B total cash) that can use to acquire inorganic growth down the stretch.  However, the street expectation is for ongoing beats and raises, so lowering the bar now would be the prudent approach, especially with Costolo's jobs seemingly on the line.  We're expecting light guidance, but no telling how management will approach it.


Second, It will not take much net user growth to produce an accelerating y/y growth rate for US MAUs.  Anything over 1.5M net new US MAUs will produce y/y growth in excess of the 19% reported in 3Q14 (TWTR has averaged ~3M net ads since 1Q14).  It's important to note that TWTR has an embedded aesthetic tailwind on its MAU growth from third-party accounts, the majority of which from automated accounts with no discernible user activity.   Any upside on MAUs could rekindle optimism in the name.


TWTR: Thoughts into the Print (4Q14) - TWTR   Bot Accounts 3Q14 2


That said, there is more risk to being short the print than we would like, but we suspect any near-term upside would be short-lived.  



Let us know if you have any question, or would like to discuss in more detail. 


Hesham Shaaban, CFA





Takeaway: In today's edition of the Macro Playbook, we discuss the potential turn from #Quad4 to #Quad1 back to #Quad4 in the U.S. for 1H15.


Long Ideas/Overweight Recommendations

  1. Consumer Staples Select Sector SPDR Fund (XLP)
  2. iShares U.S. Home Construction ETF (ITB)
  3. SPDR Gold Shares (GLD)
  4. PowerShares DB U.S. Dollar Index Bullish Fund (UUP)
  5. iShares 20+ Year Treasury Bond ETF (TLT)
  1. LONG BENCH: Vanguard REIT ETF (VNQ), Utilities Select Sector SPDR Fund (XLU), Vanguard Extended Duration Treasury ETF (EDV), Healthcare Select Sector SPDR Fund (XLV)

Short Ideas/Underweight Recommendations

  1. CurrencyShares Japanese Yen Trust (FXY)
  2. SPDR Barclays High Yield Bond ETF (JNK)
  3. Industrial Select Sector SPDR Fund (XLI)
  4. iShares MSCI Emerging Markets ETF (EEM)
  5. SPDR S&P Regional Banking ETF (KRE)
  1. SHORT BENCH: SPDR Oil & Gas Exploration & Production ETF (XOP), CurrencyShares Euro Trust (FXE), WisdomTree Emerging Currency Fund (CEW)



#Quad414 Progressing According to the Plan: Last week’s deluge of economic data confirmed a #Quad4 setup for the fourth quarter of 2014. On both an absolute and relative (i.e. directional) basis, data continued to run counter to the consensus narrative of the U.S. being a +3-5% GDP growth economy and financial markets responded appropriately:


  • S&P 500 Index: -2.8% WoW
  • Dow Jones Industrial Average: -2.9% WoW
  • Russell 2000 Index: -2% WoW
  • NASDAQ Composite Index: -2.6% WoW
  • U.S. 10yr Treasury Note Yield: -16bps WoW to close the week at 1.64% – the lowest level since late-April of 2013, prior to Bernanke’s May 22nd speech of that year which ignited the infamous “Taper Tantrum”
  • Bloomberg U.S. 10+ Year Treasury Bond Index: +2.3% WoW


Net-net, the data was bad, on the margin, and markets reflected that. Now what?


Perhaps lost said data deluge were the first three releases of high-frequency economic growth indicators for the month of January:


  • Markit Manufacturing PMI: a preliminary figure of 53.7 in JAN vs. 53.9 in DEC
  • Markit Services PMI: a preliminary figure of 54 in JAN vs. 53.3 in DEC
  • Markit Composite PMI: a preliminary figure of 54.2 in JAN vs. 53.5 in DEC








The three key takeaways from those releases are as follows:


  1. The slowdown in the late-cycle segments of the economy (e.g. manufacturing, CapEx, earnings, inflation, employment, etc.) continues unabated
  2. The U.S. economy at large continues to be driven by consumption, as highlighted by the uptick in services sector growth dragging the composite index higher despite the ongoing deterioration in manufacturing
  3. The composite index bucked a sustained trend of deceleration by positing its first positive sequential uptick since June


We’ll see if takeaway #3 is sustainable as we parse through January high-frequency economic data over the next 3-4 weeks. The Bayesian inference process we apply to modeling the economy would suggest that it is. In layman’s terms, Q1 has an extremely subdued base effect, which greatly enhances the probability that YoY real GDP growth accelerates in the quarter.


Don’t get too excited (read: position sizing) about chasing any growth-oriented sector, style factor or security, however.


Specifically, that same Bayesian inference process suggests that we’re headed right back in the ever-defensive #Quad4 for Q2. The base effects from Q2 through Q4 of this year are as difficult as the base effect in Q1 is easy.






***CLICK HERE to download the full TACRM presentation.***



Global #Deflation: Amidst a backdrop of secular stagnation across developed economies, we continue to think cyclical forces (namely #StrongDollar driven commodity price deflation) will drag down reported inflation readings globally over the intermediate term. That is likely to weigh heavily upon long-term interest rates in the developed world, underpinning our bullish outlook for U.S. Treasury bonds.


The Hedgeye Macro Playbook (1/29)


#Quad414: After DEC and Q4 (2014) data slows, in Q1 of 2015 we think growth in the US is likely to accelerate from 4Q, aided by base effects and a broad-based pickup in real discretionary income. We do not, however, think such a pickup is sustainable, as we foresee another #Quad4 setup for the 2nd quarter. Risk managing these turns at the sector and style factor level will be the key to generating alpha in the U.S. equity market in 1H15.


#Quad414 Confirmation (1/30)


Long #Housing?: The collective impact of rising rates, severe weather, waning investor interest, decelerating HPI, and tighter credit capsized housing in 2014.  2015 is setting up as the obverse with demand improving, the credit box opening and 2nd derivative price and volume trends beginning to inflect positively against progressively easier comps. We'll review the current dynamics and discuss whether the stage is set for a transition from under to outperformance for the complex.


EARLY LOOK: USA Inc. (1/30)


Best of luck out there,




Darius Dale

Associate: Macro Team


About the Hedgeye Macro Playbook

The Hedgeye Macro Playbook aspires to present investors with the robust quantitative signals, well-researched investment themes and actionable ETF recommendations required to dynamically allocate assets and front-run regime changes across global financial markets. The securities highlighted above represent our top ten investment recommendations based on our active macro themes, which themselves stem from our proprietary four-quadrant Growth/Inflation/Policy (GIP) framework. The securities are ranked according to our calculus of the immediate-term risk/reward of going long or short at the prior closing price, which itself is based on our proprietary analysis of price, volume and volatility trends. Effectively, it is a dynamic ranking of the order in which we’d buy or sell the securities today – keeping in mind that we have equal conviction in each security from an intermediate-term absolute return perspective. 

February 2, 2015

February 2, 2015 - HE DTR 2 2 15

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