Infection Spike in Texas and California Creates “Asymmetric” Expectations About new Lockdowns

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Large speculators’ bet on the fall of S&P 500 has risen to the highest level since early 2016, shows weekly CFTC update:

The chart shows that net position of large speculators in the S&P 500 futures (long – short positions) has been steadily declining over the past three and a half months and has exceeded -40K contracts. In other words, speculators have been building up short positions for almost the entire period of the “bear rally”. The lack of consensus on the part of professional market participants is certainly alarming.

It should be noted that in the United States the epidemiological situation is exacerbating, which, for example, can be seen from the sharp increase in the number of new cases in California or Texas:

The number of new confirmed cases in Texas

Number of new confirmed cases in California

Naturally, this cannot leave investors indifferent, especially in the light of reports that Texas has already started to “count free beds”. This leads to weakness in the US stock markets relative to European equities, obviously due to “asymmetric” expectations of new lockdowns in the US and in the EU. European stocks are rising today, but expectations for the US market remain negative which is reflected in S&P500 futures loss on Wednesday.

A further decline in US stock indices and strengthening of USD are expected due to expectations that infection spike may continue to gain traction. The bullish view on gold that we discussed in yesterday remains fully intact due to worsening news background.

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