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Technically Speaking: COT Positioning – Back To Extremes: Q2-2020

Technically Speaking: COT Positioning – Back To Extremes: Q2-2020

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As discussed in Is It Insanely Stupid To Chase Stocks, the market has gotten quite ahead of the fundamentals as money continues to chase performance. In the Q2-2020 review of Commitment Of Traders report (COT,) we can see how positioning has moved back to extremes.

The market remains in a bullish trend from the market lows but is very overbought short-term. Despite valuations reaching more extreme levels, economic growth very weak, and a risk of a reduction in stimulus; investors continue to chase markets.

While the S&P 500 is primarily driven higher by the largest 5-market capitalization companies, it is the Nasdaq that has now reached a more extreme deviation from its longer-term moving average.

Moving averages, especially longer-term ones, are like gravity. The further prices become deviated from long-term averages, the greater the “gravitational pull” becomes. An “average” requires prices to trade above and below the “average” level. The risk of a reversion grows with the size of the deviation.

The Nasdaq currently trades more than 23% above its 200-dma. The last time such a deviation existed was in February of this year. The Nasdaq also trades 3-standard deviations above the 200-dma, which is another extreme indication. 

Such does not mean the market is about to crash. However, it does suggest the “rubber band” is stretched so tightly any minor disappointment could lead to a contraction in prices.

But it isn’t just the more extreme advance of the market over the past 8-weeks which has us a bit concerned in the short-term, but a series of other indications which typically suggest short- to intermediate-terms corrections in the market.

The “Greed” Factor

Market sentiment is back to more “extreme greed” levels. Unlike a pure “sentiment” based indicator, this gauge is a view of what investors are doing, versus what they are “feeling.”

The rapid acceleration in price has sent our technical composite gauge back towards extreme overbought levels as well. (Get this chart every week at RIAPRO.NET)

What we know is that markets move based on sentiment and positioning. Such makes sense considering that prices are affected by buyers and sellers’ actions at any given time. Most importantly, when prices, or positioning, become too “one-sided,” a reversion always occurs. As Bob Farrell’s Rule #9 states:

“When all experts agree, something else is bound to happen.” 

So, how are traders positioning themselves currently?

Positioning Review

The COT (Commitment Of Traders) data, which is exceptionally important, is the sole source of the actual holdings of the three key commodity-trading groups, namely:

  • Commercial Traders: this group consists of traders that use futures contracts for hedging purposes and whose positions exceed the reporting levels of the CFTC. These traders are usually involved with the production and/or processing of the underlying commodity.
  • Non-Commercial Traders: this group consists of traders that don’t use futures contracts for hedging and whose positions exceed the CFTC reporting levels. They are typically large traders such as clearinghouses, futures commission merchants, foreign brokers, etc.
  • Small Traders: the positions of these traders do not exceed the CFTC reporting levels, and as the name implies, these are usually small traders.

The data we are interested in is the second group of Non-Commercial Traders.

This is the group that speculates on where they believe the market is headed. While you would expect these individuals to be “smarter” than retail investors, we find they are just as subject to “human fallacy” and “herd mentality” as everyone else.

Therefore, as shown in the charts below, we can look at their current net positioning (long contracts minus short contracts) to gauge excessive bullishness or bearishness. 

Volatility 

The extreme net-short positioning against the volatility index was an excellent indicator of the February peak. The sharp sell-off in March, not surprisingly, sharply reduced the short-positions outstanding.

With the markets continuing to rally from the March lows, investors are again becoming encouraged to take on risk. Currently, net shorts on the VIX are rising sharply and are back to more extreme levels. While not as severe as seen in 2017 or 2020, the positioning is large enough to fuel a more significant correction. The only question is the catalyst.

Investors have gotten used to extremely low levels of volatility, which is unique to this market cycle. Due to low volatility, the complacency has encouraged investors to take on greater levels of risk than they currently realize. When volatility eventually makes it return, as we saw in March, the consequences will not be kind.

Crude Oil Extreme

The recent attempt by crude oil to get back above the 200-dma coincided with the Fed’s initiation of QE-4. Historically, these liquidity programs tend to benefit highly speculative positions like commodities, as liquidity seeks the highest rate of return.

While prices collapsed along with the economy in March, there has been a sharp reversion on expectations for a global economic recovery. Interestingly, with the economic recovery showing signs of slowing, crude oil has stalled below its 200-dma. As we discussed recently with our RIAPRO subscribers:

  • The rally in oil has stalled at the 200-dma and the 50% Fibonacci retracement level.
  • Importantly, the lower pane “buy/sell” signal is the most overbought in 25-years. (We see the same in many other areas of the market as well like Technology, Materials, Discretionary, Communications, Etc.) A correction is coming, and it will likely be large.
  • There is currently little support for oil and a break of $35 will lead to a retest in the $20’s. 
  • Long-Term Positioning: Bearish

Despite the decline in oil prices earlier this year, it is worth noting crude oil positioning is still on the bullish side with 543,826 net long contracts. While not the highest level on record, it is definitely on the “extremely bullish” side.

Oil Leads Stocks & The Economy

Importantly, there is a decent correlation to the rise, and fall, of oil prices and the S&P 500 index. If oil begins to correct again, it will be in conjunction with an economic downturn. Stocks will follow suit.

As we wrote back in February:

“The inherent problem with this is that if crude oil breaks below $48/bbl, those long contracts will get liquidated. Such will likely push oil back into the low 40’s very quickly. The decline in oil is both deflationary and increases the risk of an economic recession.”

The rest, as they say, is history.

U.S. Dollar Extreme

Another index we track each week at RIAPRO.NET is the U.S. Dollar.

Speaking of hedges, we began to accumulate a long-dollar position in portfolios this past week. There are several reasons for this:
  1. When the financial media discusses the dollar’s demise, such is usually a good contrarian signal. 
  2. The dollar has recently had a negative correlation to stocks, bonds, gold, commodities, etc.
  3. The surging exuberance in gold also acts as a reliable contrarian indicator of the dollar.  
  4. The dollar is currently 3-standard deviations below the 200-dma, which historically is a strong buy signal for a counter-trend rally. 

Insanely stupid, “Insanely Stupid” To Chase Stocks As Economy Plunges? 07-31-20

Given our portfolios are long weighted in equities, bonds, and gold currently, we need to start hedging that risk with a non-correlated asset. We also trimmed some of our holdings in conjunction with adding a dollar hedge.

  • As noted previously: “The dollar has rallied back to that all-important previous support line. IF the dollar can break back above that level, and hold, then commodities, and oil, will likely struggle.
  • That is precisely what happened over the last two weeks. The dollar has strengthened that rally as concerns over the “coronavirus” persist. With the dollar close to testing previous highs, a break above that resistance could result in a sharp move higher for the dollar.
  • The rising dollar is not bullish for oil, commodities or international exposures.
  • The “sell” signal has begun to reverse. Pay attention.

Much of the bulls rallying cry has been based on the dollar weakening with the onset of QE. However, over the last couple of months, the long-dollar bias has reverted to a net “short” positioning. Historically, these reversals are markers of more important peaks in the market, and subsequent corrections. 

Interest Rate Extreme

One of the biggest conundrums for the financial market “experts” is why interest rates fail to rise. In March of last year, I wrote “The Bond Bull Market” which was a follow up to our earlier call for a sharp drop in rates as the economy slowed. We based that call on the extreme “net-short positioning” in bonds which suggested a counter-trend rally was likely.

Since then, rates fell to the lowest levels in history as economic growth collapsed. Importantly, while the Federal Reserve turned back on the “liquidity pumps” in March, juicing markets back toward all-time highs, bonds have continued to attract money for “safety” over “risk.” 

Not surprisingly, despite much commentary to the contrary, the number of contracts “net-short” the 10-year Treasury, while reduced, remains at levels that have preceded further declines in rates. Such suggests we are “not out of the woods” yet, economically speaking.

Importantly, even while the “net-short” positioning in bonds has reversed, rates have failed to rise correspondingly. The reason for this is due to rising levels of Eurodollar positioning. Such is due to foreign banks pushing reserves into U.S. Treasuries for “safety” and “yield.”

There is a probability for rates to fall in the months ahead coinciding with further deterioration in economic growth. 

Conclusion

Amazingly, investors seem to be residing in a world without any perceived risks and a strong belief that financial markets can only rise further. The arguments supporting those beliefs are based on comparisons to previous peak market cycles. Unfortunately, investors tend to be wrong at market peaks and bottoms.

With retail positioning very long-biased, the implementation of QE-4 has once again removed all “fears” of a correction, recession, or bear market. Historically, such sentiment excesses form around short-term market peaks.

Such is a excellent time to remind you of the other famous “Bob Farrell Rule” to remember: 

“#5 – The public buys the most at the top and the least at the bottom.”

What investors miss is that while a warning doesn’t immediately translate into a negative consequence, such doesn’t mean you should not pay attention to it.

As I concluded in our recent newsletter:

“There remains an ongoing bullish bias that continues to support the market near-term. Bull markets built on ‘momentum’ are very hard to kill. Warning signs can last longer than logic would predict. The risk comes when investors begin to ‘discount’ the warnings and assume they are wrong. 

It is usually just about then the inevitable correction occurs. Such is the inherent risk of ignoring risk.'”

The cost of not paying attention to risk can be extraordinarily high.

The post Technically Speaking: COT Positioning – Back To Extremes: Q2-2020 appeared first on RIA.

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International

Removing antimicrobial resistance from the WHO’s ‘pandemic treaty’ will leave humanity extremely vulnerable to future pandemics

Drug-resistant microbes are a serious threat for future pandemics, but the new draft of the WHO’s international pandemic agreement may not include provisions…

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Antimicrobial resistance is now a leading cause of death worldwide due to drug-resistant infections, including drug-resistant strains of tuberculosis, pneumonia and Staph infections like the methicillin-resistant Staphylococcus aureus shown here. (NIAID, cropped from original), CC BY

In late May, the latest version of the draft Pandemic Instrument, also referred to as the “pandemic treaty,” was shared with Member States at the World Health Assembly. The text was made available online via Health Policy Watch and it quickly became apparent that all mentions of addressing antimicrobial resistance in the Pandemic Instrument were at risk of removal.

Work on the Pandemic Instrument began in December 2021 after the World Health Assembly agreed to a global process to draft and negotiate an international instrument — under the Constitution of the World Health Organization (WHO) — to protect nations and communities from future pandemic emergencies.


Read more: Drug-resistant superbugs: A global threat intensified by the fight against coronavirus


Since the beginning of negotiations on the Pandemic Instrument, there have been calls from civil society and leading experts, including the Global Leaders Group on Antimicrobial Resistance, to include the so-called “silent” pandemic of antimicrobial resistance in the instrument.

Just three years after the onset of a global pandemic, it is understandable why Member States negotiating the Pandemic Instrument have focused on preventing pandemics that resemble COVID-19. But not all pandemics in the past have been caused by viruses and not all pandemics in the future will be caused by viruses. Devastating past pandemics of bacterial diseases have included plague and cholera. The next pandemic could be caused by bacteria or other microbes.

Antimicrobial resistance

Yellow particles on purple spikes
Microscopic view of Yersinia pestis, the bacteria that cause bubonic plague, on a flea. Plague is an example of previous devastating pandemics of bacterial disease. (NIAID), CC BY

Antimicrobial resistance (AMR) is the process by which infections caused by microbes become resistant to the medicines developed to treat them. Microbes include bacteria, fungi, viruses and parasites. Bacterial infections alone cause one in eight deaths globally.

AMR is fueling the rise of drug-resistant infections, including drug-resistant tuberculosis, drug-resistant pneumonia and drug-resistant Staph infections such as methicillin-resistant Staphylococcus aureus (MRSA). These infections are killing and debilitating millions of people annually, and AMR is now a leading cause of death worldwide.

Without knowing what the next pandemic will be, the “pandemic treaty” must plan, prepare and develop effective tools to respond to a wider range of pandemic threats, not solely viruses.

Even if the world faces another viral pandemic, secondary bacterial infections will be a serious issue. During the COVID-19 pandemic for instance, large percentages of those hospitalized with COVID-19 required treatment for secondary bacterial infections.

New research from Northwestern University suggests that many of the deaths among hospitalized COVID-19 patients were associated with pneumonia — a secondary bacterial infection that must be treated with antibiotics.

An illustrative diagram that shows the difference between a drug resistant bacteria and a non-resistant bacteria.
Antimicrobial resistance means infections that were once treatable are much more difficult to treat. (NIAID), CC BY

Treating these bacterial infections requires effective antibiotics, and with AMR increasing, effective antibiotics are becoming a scarce resource. Essentially, safeguarding the remaining effective antibiotics we have is critical to responding to any pandemic.

That’s why the potential removal of measures that would help mitigate AMR and better safeguard antimicrobial effectiveness is so concerning. Sections of the text which may be removed include measures to prevent infections (caused by bacteria, viruses and other microbes), such as:

  • better access to safe water, sanitation and hygiene;
  • higher standards of infection prevention and control;
  • integrated surveillance of infectious disease threats from human, animals and the environment; and
  • strengthening antimicrobial stewardship efforts to optimize how antimicrobial drugs are used and prevent the development of AMR.

The exclusion of these measures would hinder efforts to protect people from future pandemics, and appears to be part of a broader shift to water-down the language in the Pandemic Instrument, making it easier for countries to opt-out of taking recommended actions to prevent future pandemics.

Making the ‘pandemic treaty’ more robust

Measures to address AMR could be easily included and addressed in the “pandemic treaty.”

In September 2022, I was part of a group of civil society and research organizations that specialize in mitigating AMR who were invited the WHO’s Intergovernmental Negotiating Body (INB) to provide an analysis on how AMR should be addressed, within the then-draft text.

They outlined that including bacterial pathogens in the definition of “pandemics” was critical. They also identified specific provisions that should be tweaked to track and address both viral and bacterial threats. These included AMR and recommended harmonizing national AMR stewardship rules.

In March 2023, I joined other leading academic researchers and experts from various fields in publishing a special edition of the Journal of Medicine, Law and Ethics, outlining why the Pandemic Instrument must address AMR.

The researchers of this special issue argued that the Pandemic Instrument was overly focused on viral threats and ignored AMR and bacterial threats, including the need to manage antibiotics as a common-pool resource and revitalize research and development of novel antimicrobial drugs.

Next steps

While earlier drafts of the Pandemic Instrument drew on guidance from AMR policy researchers and civil society organizations, after the first round of closed-door negotiations by Member States, all of these insertions, are now at risk for removal.

The Pandemic Instrument is the best option to mitigate AMR and safeguard lifesaving antimicrobials to treat secondary infections in pandemics. AMR exceeds the capacity of any single country or sector to solve. Global political action is needed to ensure the international community works together to collectively mitigate AMR and support the conservation, development and equitable distribution of safe and effective antimicrobials.

By missing this opportunity to address AMR and safeguard antimicrobials in the Pandemic Instrument, we severely undermine the broader goals of the instrument: to protect nations and communities from future pandemic emergencies.

It is important going forward that Member States recognize the core infrastructural role that antimicrobials play in pandemic response and strengthen, rather than weaken, measures meant to safeguard antimicrobials.

Antimicrobials are an essential resource for responding to pandemic emergencies that must be protected. If governments are serious about pandemic preparedness, they must support bold measures to conserve the effectiveness of antimicrobials within the Pandemic Instrument.

Susan Rogers Van Katwyk is a member of the WHO Collaborating Centre on Global Governance of Antimicrobial Resistance at York University. She receives funding from the Wellcome Trust and the Social Sciences and Humanities Research Council of Canada.

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Repeated COVID-19 Vaccination Weakens Immune System: Study

Repeated COVID-19 Vaccination Weakens Immune System: Study

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

Repeated COVID-19…

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Repeated COVID-19 Vaccination Weakens Immune System: Study

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

Repeated COVID-19 vaccination weakens the immune system, potentially making people susceptible to life-threatening conditions such as cancer, according to a new study.

A man is given a COVID-19 vaccine in Chelsea, Mass., on Feb. 16, 2021. (Joseph Prezioso/AFP via Getty Images)

Multiple doses of the Pfizer or Moderna COVID-19 vaccines lead to higher levels of antibodies called IgG4, which can provide a protective effect. But a growing body of evidence indicates that the “abnormally high levels” of the immunoglobulin subclass actually make the immune system more susceptible to the COVID-19 spike protein in the vaccines, researchers said in the paper.

They pointed to experiments performed on mice that found multiple boosters on top of the initial COVID-19 vaccination “significantly decreased” protection against both the Delta and Omicron virus variants and testing that found a spike in IgG4 levels after repeat Pfizer vaccination, suggesting immune exhaustion.

Studies have detected higher levels of IgG4 in people who died with COVID-19 when compared to those who recovered and linked the levels with another known determinant of COVID-19-related mortality, the researchers also noted.

A review of the literature also showed that vaccines against HIV, malaria, and pertussis also induce the production of IgG4.

“In sum, COVID-19 epidemiological studies cited in our work plus the failure of HIV, Malaria, and Pertussis vaccines constitute irrefutable evidence demonstrating that an increase in IgG4 levels impairs immune responses,” Alberto Rubio Casillas, a researcher with the biology laboratory at the University of Guadalajara in Mexico and one of the authors of the new paper, told The Epoch Times via email.

The paper was published by the journal Vaccines in May.

Pfizer and Moderna officials didn’t respond to requests for comment.

Both companies utilize messenger RNA (mRNA) technology in their vaccines.

Dr. Robert Malone, who helped invent the technology, said the paper illustrates why he’s been warning about the negative effects of repeated vaccination.

“I warned that more jabs can result in what’s called high zone tolerance, of which the switch to IgG4 is one of the mechanisms. And now we have data that clearly demonstrate that’s occurring in the case of this as well as some other vaccines,” Malone, who wasn’t involved with the study, told The Epoch Times.

So it’s basically validating that this rush to administer and re-administer without having solid data to back those decisions was highly counterproductive and appears to have resulted in a cohort of people that are actually more susceptible to the disease.”

Possible Problems

The weakened immune systems brought about by repeated vaccination could lead to serious problems, including cancer, the researchers said.

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Tyler Durden Sat, 06/03/2023 - 22:30

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Robert F. Kennedy Jr. Banned By Major Social Media Site, Campaign Pages Blocked

Robert F. Kennedy Jr. Banned By Major Social Media Site, Campaign Pages Blocked

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Twitter…

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Robert F. Kennedy Jr. Banned By Major Social Media Site, Campaign Pages Blocked

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Twitter owner Elon Musk invited Democrat presidential candidate Robert F. Kennedy Jr. for a discussion on his Twitter Spaces after Kennedy said his campaign was suspended by Meta-owned Instagram.

Interesting… when we use our TeamKennedy email address to set up @instagram accounts we get an automatic 180-day ban. Can anyone guess why that’s happening?” he wrote on Twitter.

An accompanying image shows that Instagram said it “suspended” his “Team Kennedy” account and that there “are 180 days remaining to disagree” with the company’s decision.

Robert F. Kennedy, Jr. attends Keep it Clean to benefit Waterkeeper Alliance in Los Angeles, Calif., on March 1, 2018. (John Sciulli/Getty Images for Waterkeeper Alliance)

In response to his post, Musk wrote: “Would you like to do a Spaces discussion with me next week?” Kennedy agreed, saying he would do it Monday at 2 p.m. ET.

Hours later, Kennedy wrote that Instagram “still hasn’t reinstated my account, which was banned years ago with more than 900k followers.” He argued that “to silence a major political candidate is profoundly undemocratic.”

“Social media is the modern equivalent of the town square,” the candidate, who is the nephew of former President John F. Kennedy, wrote. “How can democracy function if only some candidates have access to it?”

The Epoch Times approached Instagram for comment.

It’s not the first time that either Facebook or Instagram has taken action against Kennedy. In 2021, Instagram banned him from posting claims about vaccine safety and COVID-19.

After he was banned by the platform, Kennedy said that his Instagram posts raised legitimate concerns about vaccines and were backed by research. His account was banned just days after Facebook and Instagram announced they would block the spread of what they described as misinformation about vaccines, including research saying the shots cause autism, are dangerous, or are ineffective.

“This kind of censorship is counterproductive if our objective is a safe and effective vaccine supply,” he said at the time.

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Tyler Durden Sat, 06/03/2023 - 20:30

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