Following futures positions of non-commercials are as of October 16, 2018.

10-year note: Currently net short 616k, down 6.5k.

Three weeks ago, non-commercials were net short 756,316 contracts in 10-year Treasury note futures – a record.  They have since reduced their holdings by north of 140,000 contracts.  This did have an impact on the 10-year rate (3.2 percent), which dropped intraday from 3.25 percent on the 5th to 3.13 percent on the 11th.  But bond bears are not giving up easy.  Last week’s low defended the October 3rd breakout past the mid-May high of 3.12 percent.  This level goes back to at least June 2003.  Thus far, the bears should be heartened by defense of this resistance-turned-support.  But they have to increasingly grapple with the overbought conditions rates find themselves in, the weekly in particular.  Bulls would have significantly increased their odds if they can push rates under the aforementioned 3.12 percent.  This can potentially tempt non-commercials to continue to cover their shorts.

30-year bond: Currently net short 103.9k, down 34.4k.

Major economic releases next week are as follows.

New home sales for September are due out Wednesday.  Sales increased 3.5 percent month-over-month to a seasonally adjusted annual rate of 629,000 units.  Last November’s 712,000 was the highest since 727,000 in October 2007.

Durable goods orders for September are due out Thursday.  In August, orders for non-defense capital goods ex-aircraft – proxy for business plans for capex – jumped 7.1 percent year-over-year to $69.2 billion (SAAR), but fell 0.9 percent m/m.

Friday brings GDP (3Q18, 1st estimate) and University of Michigan’s consumer sentiment index (October, final).

Real GDP expanded 4.2 percent in 2Q.  This was the fastest pace in 15 quarters.  As of Wednesday, the Atlanta Fed’s GDPNow model forecasts 3.9-percent growth in 3Q.