Need to Know: A one-way bet could end in a steep selloff for this commodity

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It looks like the great march to 3% for the 10-year Treasury bond yield has been called off, at least for now.

It’s a good thing, then, that investors have plenty to keep them busy this week on the earnings front, with Google kicking off a big week for techs last night, Facebook and Twitter tomorrow, then Amazon Thursday.

But investors aren’t likely to so easily forget how close the 10-year yield came and how it remains in the ballpark of that key level, especially given the huge boost the dollar has gotten as a result. That’s been tough on those who have been making heavy bets that the greenback’s rout, which started in early 2017, will just keep going.

Fresh data from the Commodity Futures Trading Commission, which tracks futures bets on a number of assets, shows bearish bets on the dollar intensified recently — what some would call a desperate gamble.

That brings us to our chart of the day from Jesse Colombo, analyst at Clarity Financial, in a blog post for Real Investment Advice. While the consensus view is for a weak buck, he notes the so-called “smart money” — big hedge funds — are upping their own bullish bets on U.S. Dollar Index futures. The last several times this has happened, he said, the greenback has gone up.

He says the dollar will have to bust out of the so-called triangle pattern, shown in this chart, before the end of the downtrend can truly be declared.

Jesse Colombo

But that leads us to another worry for investors. If the dollar truly starts to bust higher, it could be bad news for crude, as the two assets tend to move inversely, according to Colombo.

“The U.S. dollar’s surge in 2014 and 2015 was the trigger for the violent crude oil bust,” he says, noting that big hedge funds are even more bearish now on crude than they were just before oil popped in 2014.

“While most market participants currently believe that further bearish dollar/bullish commodities action is practically guaranteed, they need to be aware of the tendency for the market to ‘tip over when everyone gets to one side of the boat,’” he says.

The markets

The day is looking fairly upbeat with Dow YMM8, +0.58%  , S&P 500 ESM8, +0.55%   and Nasdaq futures NQM8, +0.55%  all nicely in the green. That’s after the Dow DJIA, -0.06% logged its fourth-straight losing session Monday, the Nasdaq COMP, -0.25%  lost some ground, and the S&P  SPX, +0.01%  ended flat.

The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +0.00%  has pulled back to 2.966%, while the dollar DXY, -0.05%  is holding at 3 1/2 year highs.

Gold GCM8, +0.26%  is higher, and crude CLM8, +0.63%  is moving up alongside Brent, which broke above $75 at one point in the early going. Tech stocks fell in Asia ADOW, +0.54%  , though China was lifted by talk of deeper reforms by the government. European stocks SXXP, +0.06%  are holding at 2-month highs.

Opinion: What’s sabotaging gold’s attempts to rally

Bitcoin BTCUSD, +4.46%   is charging higher this morning, trucking further past the $9,000 level.

See the Market Snapshot column for more.

Earnings

It’s a big earnings day, headlined by Caterpillar CAT, +0.48%  , 3M MMM, -0.86% United Tech UTX, +0.31%  , Harley-Davidson HOG, -0.07%  , Coca-Cola KO, +0.55%  , Eli Lilly LLY, +1.44%  and Biogen BIIB, -1.41%  . Results from Texas Instruments TXN, -1.87%  and Amgen AMGN, +1.81%   are coming after the close.

Google parent Alphabet GOOGL, -0.33%  kicked off a major week for tech earnings last night. The internet giant reported an earnings beat, thanks to its Uber stake, but the company also spent a lot more money. Meanwhile, Nest finances aren’t looking so great.

What should Google do with all its cash? Reformed Broker’s Josh Brown asked the question, and got lots of answers — some even serious.

Amazon earnings: 100 million members could be the company’s Prime number

Whirlpool WHR, +0.64%   got hit by an earnings miss and gloomier-than-expected outlook.

The buzz

Facebook FB, -0.26%  has just lifted the lid on its rule book over what kind of posts it allows on the social network, from drug use to harassment and bullying.

Mitel Networks MITL, +0.79%  soars after the business communications group gets buyout deal from private-equity firm Searchlight Capital Partners.

China’s ride-hailing giant, Didi Chuxing Technology, is in talks for a multibillion-dollar IPO that could take place as soon as this year.

NBA star Steph Curry has signed a deal with Sony SNE, -0.70%  to develop movies, TV and maybe even some virtual-reality products.

The European Union has cracked open a full-blown probe into Apple’s AAPL, -0.29%  deal to buy song-recognition app Shazam.

In D.C. news, Bloomberg reporters found evidence Trump stayed overnight in Moscow in 2013, despite the alibis POTUS has provided. Meanwhile, Mike Pompeo’s nomination for secretary of state is looking more likely, after he got support from holdout Rand Paul.

Case-Shiller home prices, consumer confidence and new-home sales updates are on tap later today.

Read: U.S. economy gassed up and ready for spring.

The call

U.S. stocks could fall 30% to 40% if markets keep seeing bond repricing, says our call of the day, from Rainer Michael Preiss, executive director at Taurus Wealth Advisor. In an interview with CNBC, he points to a 3% yield on the 10-year U.S. Treasury note as the “line in the sand” that could lead to some readjustment in fixed-income markets.

Preiss says the big worry is that rising bond yields will cause a correction for stocks and corporate debt.

“Don’t forget that we are (at a) late-stage cycle. Everybody has been conditioned to buy the debt. That was the right strategy; it was a bit like the analogy, the narrative, that equities are cheap because bonds are even more mispriced,” says Preiss.

What should investors be doing? If interest rates are rising as parts of the economy slow down, it could get tough for stocks, he says. “That’s why increasingly … it’s important to have a look at portfolio construction and potentially reduce passive ETF exposure.”

The quote

“When I first woke up, I felt finally more normal … [with] a level of confidence as well. Confidence … like finally I’m okay now.” — That was the young unidentified U.S. veteran who just received the world’s first penis and scrotum transplant , courtesy of a team of plastic surgeons and urological surgeons at John Hopkins.

The man, who wished to remain anonymous, sustained the injuries while serving in Afghanistan, and doctors are hopeful he’ll get “near-normal urinary and sexual functions.”

Random reads

Police arrest man suspected of mowing down pedestrians with a van in Toronto, killing 10.

Former President George H.W. Bush — recovering after being hospitalized a day after his wife’s funeral — nearly died during WWII.

Video shows unruly passenger had to be tased 10 times on an American flight.

Food-stamp giant blocks startup that wants to fight poverty.

Laser jammer who flipped off police in U.K. gets 8 months in jail.

Two suspects are in custody over Canadian man’s lynching in Peru.

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