Four Futures Markets Sit at Three-Year Extremes; the Convergence Rule Still Calls It Unconfirmed
MARKET OVERVIEW: Four futures markets, WTI crude, copper, EUR/USD and the 2-year Treasury, sit simultaneously at three-year positioning extremes, while our own convergence monitor counts only two of the three categories it requires to register as a signal (COT extremes rated HIGH, an energy-stock reading rated MEDIUM). Crude's options skew is the cheapest line on the cross-asset vol-premium panel (OVX z -0.32) even as the WTI long sits at the 100th percentile of three years of positioning data. The broader regime reads calm: VIX at 15, high-yield spreads at 324bp, a macro stress score of 2.1.
TL;DR — the read in bullets
- ISM Services PMI is due at 10:00 ET, expected at 55 against a prior reading of 55.4. It lands against a regime tag of pre-vote risk-on at 64% of weighted votes: VIX 15, the 2s10s spread at ...
- The 2s10s spread is +0.45, tagged normal in the regime read. Positioning behind that curve is extreme: the 2-year Treasury's net short in data sits at the 100.0th percentile of the...
- The dollar index is up 1.0% week over week, tagged as USD strength in the regime read. EUR/USD's net short in data sits at the 1.9th percentile of the past three years, the short end...
- WTI's net long in data sits at the 100.0th percentile of the past three years, net +8,234 contracts, added to by 2,355 week over week. Crude's options skew, USO against OVX, is...
- Four markets sitting at three-year extremes on the same day have still left the system's own convergence rule one category short of a signal; that gap is the detail worth remembering tomorrow.
Go deeper in the weeklies: COT Positioning Weekly · Energy Inventory Weekly · Regime Weekly
Four Markets at Three-Year Extremes, One Convergence Rule One Category Short
Four separate corners of the futures market are at three-year positioning extremes on the same day. WTI crude's net long sits at the 100.0th percentile of the past three years, net +8,234 contracts, added to by 2,355 week over week. Copper's net long sits at the 97.4th percentile, net +78,709 contracts, trimmed by 3,940 week over week. EUR/USD's net short sits at the 1.9th percentile, the short end of that same three-year range, net -82,445 contracts, widened by 23,640 week over week. The 2-year Treasury's net short sits at the 100.0th percentile, net -1,170,255 contracts, added to by 186,853 week over week. Our own convergence monitor logs this as one HIGH-rated category. A second, MEDIUM-rated category is also firing: US total gasoline stocks are running 16% below their five-year band. Two categories is the current count, and the monitor requires three before it calls a result material. By the system's own rule, this is an unconfirmed signal.
The cross-asset vol-premium panel adds a second layer to the same picture. Crude's options skew, measured as USO against OVX, is the cheapest reading in the panel at a z-score of -0.32. Gold's skew, GLD against GVZ, is the richest reading in the same panel at z +0.18. Put the two together with the WTI position: the most crowded long in the panel's commodity set is sitting next to the cheapest line of insurance in that same panel, and the asset with the calmest options market, gold, carries the most expensive hedge against it.
None of this is happening against a stressed backdrop. The regime read is pre-vote risk-on at 64% of weighted votes: VIX at 15, the 2s10s spread at +0.45 (normal), the financial stress index at -2.35, high-yield spreads at 324bp (tight), and the dollar up 1.0% week over week. The macro stress composite itself reads 2.1, labeled Low, even though the underlying composite score moved from -44 to -29, a shift the system flagged as material on its own terms. Equities outside the US read risk-on too: the Nikkei rose 2.40% on the day and 6.18% on the week to 69,946.86.
What would move this from unconfirmed to confirmed is specific and mechanical, not a prediction. If a third category trips on the monitor's own terms, for instance the vol-premium panel moving a reading past its own band, the score goes to 3 and crosses the bar the system itself set. If no other sensor moves, the score stays at 2 and today's extremes remain exactly what they are now: four real positioning readings sitting one category short of the system's own definition of a signal.
MACRO
ISM Services PMI is due at 10:00 ET, expected at 55 against a prior reading of 55.4. It lands against a regime tag of pre-vote risk-on at 64% of weighted votes: VIX 15, the 2s10s spread at +0.45, the financial stress index at -2.35, high-yield spreads at 324bp, and the dollar up 1.0% week over week. The macro stress composite itself reads 2.1, labeled Low.
That Low label sits alongside a composite score that moved from -44 to -29, a change the system flagged as material even though the label held. The Treasury General Account balance is $984bn, up $40bn over the past four weeks, and SOFR-EFFR sits at -1bp, showing no strain in funding markets.
The Fed's own near-term path is priced two ways in the odds book: an 84% probability of no rate change after the October meeting, and a 13% probability that the fed funds upper bound sits at or above 4.5% at year-end. Both numbers describe the same policy path from separate contracts and point the same direction, toward a cutting path already mostly priced for the rest of the year.
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