As we do each Monday, in last night’s Closer we recapped the latest Commitments of Traders data from the CFTC. This data set provides a look at how speculators have positioned themselves (long or short) in various futures.  We show those readings as a net percentage of open interest. In other words, higher positive values indicate a much larger share of open interest is positioned long and vice versa for negative readings.

In the commodities space, after longs backed out in a big way earlier this year, readings have risen rapidly in gold, silver, copper, and palladium futures. As for how sharp of turnarounds they have been, the increase over the past two weeks rank in the top decile of all periods in data going back to the mid 1980s for each of the previously mentioned metals.

For the most widely followed of these metals (gold, silver, and copper), this is only the 14th time on record each of their two week changes ranked in the 90th percentile or above in the same week without another occurrence in the prior three months.  The most recent occurrence of such a large broad increase in major metals positioning was in July of 2014.

Although these readings indicate that speculators are increasingly placing long bets on these futures, such data actually can be a bit of a messy indicator for forward performance.  Although these readings indicate bullish sentiment, forward performance is the opposite in the near term with dramatic underperformance relative to the norm one week later (which we have seen play out so far). One month and three month performance tends to see further declines in these commodities as well which is not exactly unheard of for precious metals while it is dramatically weaker for the industrial metals. Six month performance is generally more in line with historical norms while the bullishness in positioning only seems to come through to price action one year out.  One year average returns for gold, silver, and copper are much stronger than the norm, although positivity rates are still just barely above 50/50. (Past performance is no guarantee of future results.) Click here to learn more about Bespoke’s premium stock market research service.

The S&P 500 is starting out the holiday-shortened week lower and compared to other years post-WWII, that is not without precedent as the index has often fallen on the Monday of Thanksgiving week. Historically, on the Monday of Thanksgiving week, the S&P 500 has tended to trade slightly lower with a 1 basis point drop. However, in years like 2022 when the index entered the week down at least 10% year to date (12 years), performance has been more positive with a 37 bps average gain, though returns have only been positive half the time.

Performance on Tuesday of Thanksgiving week has tended to be even more mixed with an average gain of 5 bps across all years and a decline of 27 bps in years when the S&P 500 was down 10% YTD heading into Thanksgiving week.

While performance is mixed on Mondays and Tuesdays of Thanksgiving week, the two days surrounding the holiday have tended to see far stronger returns. As shown below, the average gain for all years on Wednesday has been a 0.28% gain and in years that the index was down double digits year to date, it has posted an even more impressive 1.13% gain on that day with positive performance better than 90% of the time. After coming back with full bellies on Friday, traders have continued to push the index higher again with consistently positive performance, especially in years the index entered the week down significantly year to date.

As for where the index goes from there, the S&P 500 has risen from the close of the Wednesday before Thanksgiving through the end of the year roughly three-quarters of the time with an average gain of 1.93%. When momentum has been dragging the index lower year to date, though, rest of year performance has been less positive. Again looking at years in which the index has fallen at least 10% headed into Thanksgiving week as is the case this year, positive returns through the end of the year have been less common only happening half the time with an average decline of 0.1%. Click here to learn more about Bespoke’s premium stock market research service.

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

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Tech Wreck

Masayoshi Son owes SoftBank $4.7bn as side deals go sour (National News/Bloomberg)

The Japanese tech investor borrowed heavily from his own company to invest in hyper-aggressive tech funds he operated. The result is billions of losses from the world’s most optimistic buyer of technology companies. [Link]

Elon Musk Fires Twitter Employees Who Criticized Him by Kate Conger, Ryan Mac and Mike Isaac (NYT)

As the intemperate billionaire seeks to put his stamp on the social networking site, staff are being shown the door for any criticism of the boss, on top of other headcount reductions and mass departures of employees uninterested in ultimatums. [Link; soft paywall]

Battery Industrialization

The Battery Supply Chain Is Finally Coming to America by Tom Randall (Bloomberg)

With booming demand for large scale battery packs and fresh industrial policy creating huge incentives to produce batteries inside the US, domestic manufacturing of batteries is finally starting to scale up with downstream benefits for companies that make components in the US. [Link; soft paywall]

Carmakers switch to direct deals with miners to power electric vehicles by Harry Dempsey and Peter Campbell (FT)

In order to make sure they have sufficient supply, auto manufacturers are setting up joint ventures with battery makers and going straight to mines to buy input materials, a sort of vertical integration that harkens back to an earlier period for the global auto industry. [Link; paywall]

World Cup

World Cup Brings Two Million Visitors and an Epic Culture Clash to Qatar by Rory Jones, Stephen Kalin, and Joshua Robinson (WSJ)

Less than a week before the start of the World Cup, Qatar is proving an unreliable and downright uncomfortable host for the World Cup. [Link; paywall]

Qatar World Cup Faces New Edict: Hide the Beer by Tariq Panja (NYT)

Nothing goes together like the beautiful game and beer, but Qatar World Cup organizers are moving the goal as kickoff approaches in a confusing series of decisions that may keep fans from their brews. [Link; soft paywall]

The FTX Collapse

FTX Chapter 11 First Day Affidavit by Jon Wu (ThreadReader)

A step-by-step walk-through of the Chapter 11 filing offered by FTX as the exchange collapsed. The allegations are nothing short of shocking and reveal staggering malfeasance. [Link]

What happened at Alameda Research (milky eggs)

A detailed discussion of the collapse of Alameda Research, the FTX affiliate that was the alleged recipient of funding that blew a massive hole in the balance sheet of the exchange. [Link]

Let crypto burn by Stephen Cecchetti and Kim Schoenholtz (FTAV)

We don’t necessarily subscribe to this argument, but a thought-provoking call for regulators to let the crypto ecosystem collapse under its own weight and not offer any of the stability or legitimacy that comes from regulation. [Link; registration required]

Innovation

Stagnant Scientific Productivity Holding Back Growth by Greg Ip (WSJ)

The US spends a record share of GDP on research and development, but the long-term benefits of big investment in speculative technology or ideas has been illusory so far. [Link; paywall]

Your Phone Can Determine If a Bridge Is Busted by Matt Simon (Wired)

Phones inside the cars of drivers on the Golden Gate Bridge were used to identify and monitor the “modal frequency” of the bridge, providing a potential source of early warning for bridge collapses. [Link]

Wall Street Weakness

Wall Street Bonuses to Plunge as Much as 45% for Bankers – Study (US News/Reuters)

Crashing deal volumes after a massive run in 2020 and 2021 are going to lead to a famine for deal-driven bonuses at Wall Street investment banks. [Link]

Office Space

EY Future Workplace Index reveals surprisingly rosy attitudes on commercial real estate investment despite economic tightening (PRNewswire)

While the economy appears to be slowing and office demand doesn’t look spectacular, this new survey data shows surprisingly robust demand for office space and real estate more generally. [Link]

How We Spend It

6 Graphs Everyone Needs To See by Sahil Bloom (ThreadReader)

Time spent with friends and family eventually shifts towards time spent with children and coworkers. By the end of life, Americans are spending more than half of their waking hours alone. [Link]

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Have a great weekend!

It has been quite the week for Chinese stocks as stimulus and optimism over the easing of COVID restrictions has investors and traders buying up stocks leveraged to China.  The Kraneshares China Internet ETF (KWEB) was up over 11% heading into today which was the best week for the ETF…in two weeks!  If the gains for KWEB heading into today hold up through the end of the session, the four best weeks in KWEB’s history dating back to 2013 will have all occurred this year!

In addition to having two separate weekly gains of over 10% in November, KWEB is also on pace for its third straight weekly gain of 5% or more. In the ETF’s nearly 10-year history, there has never been another streak of three weeks where the ETF has rallied 5% or more.  It’s also interesting to note that three of the ETF’s five streaks of two or more weeks in a row have all come since the ETF peaked in February 2021.

An old maxim of markets is that big upside moves usually happen in bear markets, and the action in KWEB this year is a textbook example.  Despite the ETF having its four best weeks on record this year, and two separate streaks where the ETF was up 5% or more in at least two consecutive weeks, KWEB is still down over 25% YTD and is more than 70% from its high less than two years ago. Click here to learn more about Bespoke’s premium stock market research service.