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Cmefutures

Why Is Gold Outpacing the Stock Market?Looking back to 1928, when the time series for the S&P 500 began, U.S. equities have had an average annual price return of 5.9%. But gold isn’t far behind with an average yearly gain of 4.9%. It can be instructive to reprice equities in gold terms by dividing the S&P 500 index by the dollar price of gold. The S&P 500 to gold ratio has been through broad swings over the past century, with stocks falling by 86% in gold terms between 1929 and 1942; rising by 1165% versus gold from 1942 to 1967; falling by 95% versus gold from 1967 to 1980; soaring 4000% versus gold between 1980 and 2000; and then falling by 89% between 2000 and 2011. More recently, the S&P 500 rose by 350% versus gold between 2011 and 2021 but has since dropped back by around 15%. Gold tends to outperform stocks during periods of fiscal and monetary expansion, price instability, and periods of geopolitical conflict and uncertainty. As such, one might wonder if gold might be the outperformer for the remainder of the 2020s. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Erik Norland, Executive Director and Senior Economist, CME Group *CME Group futures are not suitable for all investors and involve the risk of loss. Copyright © 2023 CME Group Inc. **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
COMEX:GC1!
by CME_Group
15
Bitcoin Futures : Gap filledCME Bitcoin Futures : Gap filled ...................................................................................................................... We are not registered or licensed in any jurisdiction whatsoever to provide investing advice or anything of an advisory or consultancy nature. and are therefore are unqualified to give investment recommendations. Always do your own research and consult with a licensed investment professional before investing. This communication is never to be used as the basis of making investment decisions, and it is for entertainment purposes only.
CME:BTC1!
by CryptoTrend-Alerts
Could AI Help Dampen Inflation?Will the 2020s look like the 1970s with unstable inflation and soaring prices? Or will we return to the 2010s with low stable inflation rates of around 2%? There is a case to be made both ways. Those who worry about the possibility of durably higher inflation argue that the quarter century of low, stable inflation rates was a consequence of the end of the Cold War, globalization and just-in-time supply lines. Now, many of those factors have reversed. Military spending is on the rise worldwide as global tensions mount. Nearshoring and friendshoring are moving production out of China and into places like Vietnam and Mexico but at an increased cost. Finally, just-in-time-delivery has proven to be fragile and creates a strong potential for supply chain disruptions. These factors, combined with shrinking workforces in China, Korea, Japan and much of Europe, could put upward pressure on wages and inflation. But there is a counter argument: technology continues to advance rapidly, and generative AI could pose a threat to many middle-class service professions. And inflation has begun coming down in many countries, led by the United States. In the U.S., core inflation has fallen from 6.6% YoY to just 4.1%, and most of the remaining increase has come from one component: owners’ equivalent rent. Outside of owners’ equivalent rent, U.S. inflation is running at just 2.1% year-on-year. After a massive global tightening of rates, economies may also slow significantly, reducing inflationary pressures. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Erik Norland, Executive Director and Senior Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available below. **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
CBOT:ZB1!
by CME_Group
#bitcoin #btc has closed a historical #CME #GAPAs you see on the chart, there was very important #CMEFUTURES gap at 35 - 36K area which was opened in #luna collapse times. Now, #btcusdt price has CLOSED this historical gap and what now? It' s too early to say #btcprice will go on through the #bullrun or " BTC will directly go to close the OTHER historical GAP at 20 - 21K region!.." Now, just relax and watch the #market and especially #BTCdominance. #BTCD will reveal the direction of the market. I will update my thoughts. As you see on the chart, there only 1 #CME #FUTURES #GAP left at 20 - 21K region. Don' t underestimate this and also don' t be pessimistic, just carefully watch #bitcoin moves. NOT FINANCIAL ADVICE. Dyor.
CME:BTC1!
by naphyse
Harnessing Gains from Yield Curve NormalisationNot too long ago, watching interest rates was as boring as looking at wet paint dry. Not anymore. Interest rates and currencies are as interesting as they get. The US dollar has been clocking moves more akin to an EM currency. The greenback has been on a rollercoaster ride over the past three months in line with market expectations of Fed’s interest rate policy path. This paper is set in three parts. First, the background to rising rates and spiking yields leads to a brutal bond sell off. Then, the paper evaluates the case for further Fed rate hikes. In the third and final part, it dwells into factors that support a rate pause. It is not just the rates but also the term structure of rates that’s gone off-the-chart. This paper posits a hypothetical spread trade inspired by the divergence in 30Y and 10Y treasuries with an entry at 13 bps and a target at 40 bps hedged by a stop at 5 bps delivering a reward-to-risk of 1.5x. RISING RATES AND SPIKING YIELDS Fed’s commitment to taming inflation with a higher-for-longer stance leads to a surging dollar. Spiking bond yields help reign in inflation through tightening monetary conditions. The US 10Y Treasury Bond Yields surged to their highest level since 2007, by 20% or 0.8 percentage points since July 17th. Chart 1: US 10Y and US 2Y Treasury Yields Yield and Bond prices are inversely related. Surging yields have hammered bond prices lower resulting in a staggering record sell-off. Leveraged funds hold a record net short positioning in US 2-year and 10-year Treasury Futures. Chart 2: Record Net Short Positioning by Leverage Funds This brutal selloff has pushed yields to their highest levels in more than 15 years. Among others, portfolio managers and traders can position themselves one of the two ways: Risk Hedged Yield Harvesting: Harvest risk hedged treasury yield using cash treasury positions and Treasury futures to generate income over a long horizon, or, Gain from Yield Curve Normalisation: Deploy CME Micro Treasury Futures to engineer a spread trade to realise gains from a normalising yield curve. In a previous paper , Mint Finance illustrated the first. Distinctly, this paper covers spread trade using CME Micro Treasury Futures. THE CASE FOR HIKING The September FOMC meeting re-affirmed a higher-for-longer rate regime. Though there was no rate hike, the updated Fed’s dot plot signalled very different expectations for the rates ahead. The dot plot was updated to show a final rate hike in 2023 and fewer rate cuts in 2024. Chart 3: Contrasting US Fed’s Dot Plot between 14/June versus 20/September ( Federal Reserve ) The Fed has adequate grounds to crank up rates even more as highlighted in a previous paper . These include (a) American exceptionalism where the US Economy has been remarkably resilient, (b) Expensive Oil due to geopolitics & receding base level effects, and (c) Brutal Lessons from past on the folly of premature easing. THE CASE FOR PAUSE Factors described above have led markets to price another rate hike at Fed meetings later this year. Those views have started to tilt further towards a pause since the start of October as per CME FedWatch tool. Chart 4: Target Rate Probabilities For 13/Dec Fed Meeting ( CME FedWatch Tool ) Bond yields have surged, helping the Fed with their fight against inflation. Yields on US Treasuries surged to their highest since 2007. As yields are inversely proportional to bond prices, this is the equivalent of a major selloff in the bond market. Three reasons behind the selloff: 1. Steepening Yield Curve: Yields are finally catching up to market rates, especially for long-term treasuries; yield curve is steepening Chart 5: Yield Curve is Steepening 2. Rising Sovereign Risk Premia: The US national debt passed USD 33 trillion and is set to reach USD 52 trillion within the next 10 years. Investors are demanding higher risk premia as compensation for default risk by a heavy borrower. Chart 6: US Debt to GDP Ratio 3. Higher Yield to Compensate for Scorching Inflation: Investors are demanding higher real rates amid a high-inflation environment. Chart 7: Real Yields are marginally above zero Bond yields seem to be peaking. Solita Marcelli of UBS Global Wealth Management opines that the recent upward momentum in yields has been spurred largely by technical factors and is likely to be reversed given the overhang of uncertainty over underlying forces guiding the Treasury market. Higher bond yields support a case for a Fed pause. This is because rising treasury yields do part of the Fed’s job. Higher treasury yields tighten financial conditions in addition to being a drag on the economy. The Fed officials shared similar sentiments over the past week: San Francisco Fed President Daly noted the moves in markets “could be equivalent to another rate hike”. The Atlanta Fed chief opined that he doesn’t see the need for any more rate hikes. The Dallas Fed President remarked that such a surge in bond markets may mean less need for additional rate increases. The Fed has made it amply clear many times that it is data dependent. The data about the economy is positive. And that is concerning. Jobs data last week, and a sticky CPI print raise concerns that the Fed’s hand might be forced to hike despite US inflation being low among G7. Chart 8: US Inflation is among the lowest within G7s HYPOTHETICAL TRADE SETUP Are we witnessing peak rates? In anticipation of the peak, investors can use CME Micro Treasury Futures to harness gains in a margin efficient manner. Micro Treasury Futures are intuitive as they are quoted in yields and are fully cash settled. They are settled daily to BrokerTec US Treasury benchmarks for price integrity and consistency. As highlighted in a previous paper , each basis point change in yield represents a USD 10 change in notional value across all tenors, making spread trading seamless. Setting up a position on yield inversion between 2Y and 10Y Treasuries is exposed to significant downside risks from near-term rate uncertainty. Instead, a prudent alternative is for investors to establish a spread with a short position in 10Y rates and a long position in 30Y rates. The 30Y treasury rates demand a higher term premium due to their longer maturity. Presently, this premium is just 0.15%. In the past, this premium has reached as high as 1% during periods of monetary policy shifts with yield curve steepening. Chart 9: US Treasury Inverted Spreads Furthermore, downside on this spread is limited as the 30Y-10Y premium scarcely falls below 0% unlike the 10Y-2Y premium which has been in deep inversion for the past year. A long position in 30Y Treasury and a short position in 10Y Treasury with: Entry: 0.130 (13 basis points) Target: 0.4 (40 basis points) Stop Loss: -0.05 (5 basis points) Profit at Target: USD 270 (27 basis points x USD 10) Loss at Stop: USD 180 (18 basis points x USD 10) Reward to Risk: 1.5x Chart 10: Hypothetical Spread (Long 30Y & Short 10Y) Trade Set Up MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
TVC:US30YLong
by mintdotfinance
11
GC1! Gold Futures Short setup I present to you a possible scenario going into the weeks ahead . Gold finished Friday 13 Oct very strong with a move that no doubt destroyed many whom were taken by surprise with the aggressive move out of 1880 back up to 1945 in one trading session . The question is what's next? Well no one has the exact answer but here is a possible scenario which could be on the cards . I would not be surprised to see a small pull back and all the shorts to pile in trying to sell the top before getting trapped/destroyed with another move up towards $1970 taking out the sept 20 high/liquidity before a much bigger move to the downside. To give my chart the uncongested cleanest look , I have removed some of the levels inside of the Fib Channel to make it easier on the eye . Above we have a High volume Node+ Liquidity and the golden pocket + Fib Channel as confluences . I will be expecting a reaction at this region and will act accordingly . More data will be required to determine if this is to be another LH on the HTF or a deep RT and continuation to the upside . Set alerts at the given region and manage your SL in accordance with your trading plan and appetite for risk. Like and follow for more setups like this and check out my previous analysis on Gold
COMEX:GC1!Short
by SJTRADESFUTURES
Bitcoin Price Action & Trade UpdatesTraders, My followers know that during the last price pump by BTC to the 200 day moving avg., I took 50% off ALL trades, altcoins included. I then moved all my stops up to just above breakeven. I have been out of the office since Wed. and came back to notice that some of these stop limits have been triggered. XRP at .50 ETH at $1638 BTC at 26403 LTC at 65 SAND at .33 And my followers know that I took100% off on my JOE trade with 35% profit on that trade. Congrats to all who followed me in that trade! My remaining trades are APE, just because I never sold when I was actually in profit and thus I am waiting for either the original target or SL to be triggered. I am also in COMP with a SL of $30 This is not financial advice. Just showing you all what I am doing here. Now, as far as TA goes on BTC, you will notice we are back down to my original Inverse H&S neckline at 25,200. If this breaks, we have support just below that from Dec. '21. However, breaking both of those would be trouble and I would then anticipate our March 23 BTC CME futures gap to be filled at around 20k Stay tuned and I will try to put out a video update on Monday. Best, Stew
INDEX:BTCUSDShort
by stewdamus
2
BTC CME GAP IDEAS 📊💡In the world of cryptocurrency, Bitcoin (BTC) stands as a cornerstone, continuously captivating the attention of investors, traders, and enthusiasts alike. As we venture into the next few months, the Bitcoin market is marked by both excitement and uncertainty, presenting a myriad of possibilities for those willing to navigate the ever-shifting tides. Bitcoin's price history has been a rollercoaster ride, and this could continue in the short term. A scenario of consolidation and heightened volatility is entirely possible. Regulatory changes, macroeconomic events, or unforeseen market sentiment could lead to periods of sharp price swings. Traders should be prepared for both upward and downward moves. Bitcoin is not an isolated asset; it's influenced by global events. Geopolitical tensions, economic shifts, and unexpected developments in other markets can have a significant impact on Bitcoin's performance. Keeping a close eye on these external factors is crucial when trying to anticipate BTC's trajectory. For instance, the Securities and Exchange Commission (SEC) is expected to weigh in on multiple Bitcoin ETF filings in the build-up to early September deadlines. I have outlined a couple of scenarios on the chart. While I don't expect Bitcoin to follow these scenarios precisely, they serve as a framework to understand possible short-term price movements. Stay Tuned for Updates: We will continue to monitor key macro events that could significantly impact the cryptocurrency markets in the near future. These events may provide us with more clarity about Bitcoin's trajectory. Please note that the advice you receive about cryptocurrency should always be taken as guidance and not as definitive instructions on what to do. Investing in cryptocurrency, like any other type of investment, involves risks, including the loss of capital. Always conduct your own research and consult with a financial advisor before making investment decisions.
CME:BTC1!Short
by Blast910
Inflation Wears Out Its Welcome in JapanHas anybody ever told you to be careful what you wish for because you might get it? Well, the Bank of Japan appears to be in one of those situations today. Japan spent three decades oscillating into and out of deflation. As such, when inflation started to rise in 2022, the BOJ was initially thrilled. Finally deflation was coming to an end, and inflation was heading up to a target of 2.5%. The problem is that inflation didn’t stop heading higher at 2.5%. It’s now up to 4.2% excluding fresh food and energy. In a nation with a large elderly population where many people are on fixed incomes, having inflation too high is just as bad has having it too low. But why should the rest of the world care what happens to Japan’s inflation rate? For starters, Japan has the world’s fourth largest economy, and what happens to the yen and to Japanese bond yields is of worldwide consequence. Beginning in 2012, the BoJ launched a mega quantitative easing program – four times bigger than what the Federal Reserve did relative to the respective size of their economy. This QE program sent the yen plunging as the BoJ also capped 10-year Japanese government bond yields. But recently, they have softened the cap, sending not only Japanese bond yields higher but raising the cost of long-term borrowings all around the world, including in the United States and Europe. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Erik Norland, Executive Director and Senior Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available below. **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
TVC:JP10YEducation
by CME_Group
U.S. Economy Less Interest Rate SensitiveDespite the fastest rise in interest rates since 1981, and an inverted yield curve where short-term rates are much higher than long-term bond yields, the United States has not (at least yet) experienced the recession forecast by the vast majority of market pundits and economists. Why not? The relatively few contrarians that did not forecast a recession, including myself, had many reasons for a more optimistic view. However, the most critical reason appears to have been an appreciation of how the U.S. economy has changed over decades and become much less sensitive to interest rates. In the 1950s, 1960s and 1970s, the U.S. economy was driven by housing and manufacturing. The only choice to finance a home was the 30-year fixed rate mortgage, provided by a savings and loan institution, that deliberately borrowed short-term from savers and lent long-term, taking considerable interest rate and yield curve risk. Further, there was no such thing as financial futures or interest rate swaps to allow for the efficient hedging of interest rate risk. Fast forward to the modern economy of the 2020s. The U.S. is an economy driven by the service sector, and services are considerably less sensitive to interest rate swings than housing and automobiles. Home mortgages come in every size and flavor, from floating rates to fixed rates. Mortgages are originated by specialists and then packaged and sold to pensions, endowments and investors willing to take the risk. There are no savings and loan institutions. Financial futures, swaps and options are available for efficient hedging and management of interest rate risk. In short, the U.S. economy does not dance to interest rates like it once did. Make no mistake, though; interest rate shifts have a profound impact on asset values, from equities to bonds, to housing. It is just that the impact on the real economy is much more subdued than it once was, and a rise in rates does not automatically mean a recession is around the corner. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Bluford Putnam, Managing Director & Chief Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available here: www.cmegroup.com **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
CBOT:ZN1!Education
by CME_Group
EUR, GBP Rebound Against Dollar as Inflation Trends DivergeEuropean currencies have been rebounding strongly versus the U.S. dollar since hitting bottom in late September 2022 during the Gilt crisis when yields on U.K. government bonds surged. The rally in European currencies accelerated in July 2023 following the release of the U.S. inflation statistics (Figure 1). Figure 1: EUR and GBP have rebounded strongly in recent weeks and months Recent U.S. and European inflation data are highly divergent. U.K. core inflation has climbed to above 7%. Eurozone core inflation has risen towards 5.4% while the U.S. core consumer price index (CPI) has been falling towards 4.8%, down from a peak of 6.6% last year. What’s even more remarkable is that the divergence between U.S. and European inflation rates is much stronger when one measures it in a consistent fashion. The U.K. and European Union (EU) use a “harmonized” measure that is consistent across Europe. The harmonized measure includes rents of actual rental properties but, unlike the standard U.S. numbers, does not assume that homeowners rent properties from themselves. Excluding the so-called owners’ equivalent rent (OER) from the U.S. numbers makes a huge difference. At the moment, the assumption that homeowners rent properties from themselves has exaggerated U.S. core inflation to the tune of 2.5%. The U.S. Bureau of Labor Statistics produces what they term an “experimental” harmonized measure of core-CPI that gauges inflation the same way as in Europe and therefore excludes the OER component. This shows core inflation in the U.S. to be 2.3%, far below European levels and trending lower rather than higher (Figure 2). Figure 2: Measured consistently, U.S. core inflation is half to one-third European levels This suggests that the U.S. Federal Reserve (Fed), which appears to be preparing a 25-basis-point (bps) rate hike on July 26, could soon have its policy rate at more than 3% above the level of harmonized core inflation (Figure 3). Meanwhile, the Bank of England (BoE), which just raised rates to 5%, still has rates more than 2% below its rate of harmonized core inflation (Figure 4). The European Central Bank (ECB) has its main refinancing rate at 4%, 1.4% below the level of the eurozone’s harmonized core inflation (Figure 5). Figure 3: Fed Funds now exceed harmonized U.S. Core CPI by 3%, the most since 2007 Figure 4: The BoE’s policy rate is still 2% below inflation Figure 5: The ECB has its policy rate 1.4% below Eurozone core inflation The differences in the level of real rates (policy rates minus harmonized core inflation) suggests that the Fed may have overtightened policy and may need to reduce rates sooner than expected by market participants. By contrast, those same measures suggest that the European central banks may still be behind their inflation curve and may need to tighten policy even more substantially. Indeed, forward curves have moved significantly in the direction of this thinking in recent weeks and now price just 25 bps more in rate hikes for the Fed compared to 75 bps for the eurozone and 125-150 bps in the U.K. Elsewhere, the U.S. yield curve is much more sharply inverted than yield curves in the eurozone or the U.K. This may also lead currency traders to look past the Fed’s last expected rate hike and towards possible rate cuts if monetary overtightening produces a downturn in the U.S. sooner than it does in Europe. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Erik Norland, Executive Director and Senior Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available here: www.cmegroup.com **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
Education
by CME_Group
Three Driving Forces Behind the Ether-Bitcoin Exchange RateAt a glance: Higher tech stocks tend to boost ETHBTC, while a higher USD tends to depress it Bitcoin supply is perfectly inelastic, which contributes to its high volatility Together, ether and bitcoin account for over 60% of the total value of the world’s cryptocurrencies, but the exchange rate between the two has varied widely over time. So, what drives the Ether-Bitcoin exchange rate? The ETHBTC cross rate responds to many factors, but here are three of them. Technology Stocks On days when the tech heavy Nasdaq 100 index rallies, ether tends to rise versus bitcoin. This may be because ether, which is the currency of the Ethereum smart contract network, has more practical applications in the technology space than bitcoin, which is mainly held as a store of value and a medium of exchange. U.S. Dollar On days when the U.S. dollar is higher, ether tends to underperform versus bitcoin. Bitcoin Supply While ether can be supplied up to 18 million coins per year, bitcoin supply is limited to a maximum of 21 million coins ever, of which about 19 million already exist. Every four years, the supply of new bitcoin drops in half. In the past, halvings have often been preceded by large runups in bitcoin prices and tremendous increases in the amount of revenue that bitcoin miners are paid for matching transactions. Ether is both more volatile than bitcoin and highly correlated to bitcoin. As such, when bitcoin rises or falls versus the U.S. dollar, ether often moves to an even greater degree. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Erik Norland, Executive Director and Senior Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available here: www.cmegroup.com **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
CME:BTC1!Education
by CME_Group
The Future of Crude Oil“We are not addicted to oil, but our cars are”, said a former CIA Chief, James Woolsey. That addiction is on the decline as we pen this paper. Love it, or hate it, but you cannot ignore it. Crude oil powers the planet. When global economy stutters, oil prices plunge. Midway through 2023, crude oil demand appears wobbly on recession overhang and shaky economic recovery in China. Meanwhile, crude supply remains tight with OPEC+ scaling back production which has been compounded by limited investment in new exploration. Over the long term, energy transition is set to fundamentally change the oil market. Consumers are shifting to EVs and renewable energy. In a befitting response, producers are reducing supply. Energy transition will be anything but a straight line. It will create many risks and present many more opportunities. This paper is set in two parts. First, we highlight key takeaways from a recent IEA report on crude oil outlook until 2028. Second, we explore hedging & trading instruments on the CME Group for participating in oil markets. PART 1: KEY TAKEAWAYS FROM IEA CRUDE OIL OUTLOOK REPORT The International Energy Agency (IEA) released Oil 2023 last week. This report describes in detail the changing dynamics in the oil market until 2028. It discusses key trends such as slowing demand growth, shifting producer growth, and the impact of energy transition on oil. Recent crises have accelerated the energy transition. With COVID-19 plus rattled geopolitics, nations are increasingly more focused than ever on energy security and independence. Ten key takeaways from Oil 2023: 1. Global oil demand to rise by 6% or 5.9M bpd between 2022 to 2028, reaching 105.7M bpd. Despite this, emissions will fall 11% with efficiency improvements. 2. Annual demand growth is expected to slow sharply in the coming years from +2.4M bpd in 2022 to just +400K bpd in 2028. 3. India and China will drive demand over the next decade while consumption among OECD countries will shrink. 4. Oil demand for gasoline will peak this year and start to reverse going forward with accelerated EV transition. Demand for transport fuels is expected to peak in 2026. 5. Jet fuel demand is still lagging 2019 levels by 13% and is expected to rise rapidly but only surpass pre-COVID levels in 2027 with expected efficiency improvements. 6. The petrochemical sector will replace the demand for transport fuels. Demand from LPG, Ethane, and Naphtha will increase by 40% from now until 2028. 7. Production growth from shale is expected to slow due to rising costs and lower prices. US shale will mature to a higher-return-lower-growth trajectory. 8. Global upstream oil and gas investment is projected to increase by 11% year-on-year in 2023, reaching USD 528 billion. This represents a rise from USD 474 billion in 2022. 9. Non-OPEC+ countries, including the United States, Brazil, and Guyana, will lead the medium-term capacity expansion plans. They are expected to contribute to a supply boost of 5.1M bpd. 10. By 2028, an additional 5.9M bpd of net production capacity will come online. The rate of new capacity building will decrease over time, aligning with projected demand growth. Following four charts help visualise the large shifts underway in the crude oil market: 1. Price Sensitivity to Imbalance: Crude oil prices are highly sensitive to imbalances between production and consumption. Over the past 25 years, consumption has been marginally higher than production. Where deficit rises, spot prices rally. 2. Consumption between developed markets (DM) and emerging markets (EM): Consumption in EM will further outpace OECD countries. Consumption across EM overtook OECD in 2013 and this trend will be further entrenched. IEA forecasts that consumption in OECD countries will hit its apex this year. Thereafter, it will start shrinking going forward. In sharp contrast, EM consumption will rise by 7.8M bpd between 2022-2028. 3. India to surpass China by 2027: Although both countries will continue to see demand increase, India will surpass China as the main source of growth by 2027. 4. Non-OPEC+ will be the primary source of growth in oil production: Production growth from OPEC+ will remain intact, while non-OPEC+ countries will be driving production growth. PART 2: CRUDE OIL DERIVATIVES CME offers a variety of instruments for producers, consumers, and investors to participate in the crude oil market. This includes WTI Futures & Options and Brent Futures & Options. Beyond these, CME also operates markets in a range of refined oil products, fuel oil, and natural gas. In a previous paper , we highlighted the 40-year history of CME Group’s WTI crude oil derivatives. With an extensive suite of derivatives on offer, CME Group enables multiple alternatives for different market participants. Futures WTI Crude is a widely used global benchmark for oil prices. It is the underlying for one of the most liquid futures contracts in the world – the CME Crude Oil Futures ("CL Futures"). CL Futures is a physically delivered contract with tight correlation to the physical oil market. Over one million contracts change hands daily, representing USD 7+ billion in notional value. Each lot of the CL Futures contract represents one thousand barrels of crude oil. CL Futures provide deep liquidity and high-quality market structure for hedgers and investors to participate in and protect against oil price volatility. Monthly contracts are available over the next ten calendar years. Front month contracts are easily tradable on CME Globex electronic order book. Longer dated contracts require engagement with inter dealer brokers for price discovery and voice-based trade execution. Alternatively, CME’s Micro Crude Oil contract (MCL) offers exposure to just 100 barrels with a maintenance margin of just USD 580 (as of 23rd June), enabling affordable participation into these markets. The micro contracts allow hedgers to manage risk exposure with greater precision. Options Monthly options are available on the underlying CL futures. They are deeply liquid with seamless order book-based trading on CME Globex. Open interest on the front month contract is >300,000 lots, representing premium of more than USD 1 Billion across calls and puts. More than 20,000 contracts are traded daily. Weekly options are used to fine-tune exposure around key events such as OPEC+ meetings and interest rate announcements. Daily options are available for CL Futures. Monthly and weekly options are also available on Micro Crude Futures. CME provides calendar spread options and mid-curve options which can be used as tactical trading and hedging tools given the seasonality of oil markets. Trading Strategies There are innumerable ways of trading the crude oil market. Most popular among them include (a) taking directional position using futures and options, (b) establishing shrewd hedges or convex trading strategies using options, and (c) trading delta-neutral calendar spreads gaining from relative shifts across the futures term structure. Previously we have covered different trading ideas in crude oil, including taking a directional position - (a) Is US Oil running low on energy? (b) Is WTI crude set to rebound? (c) Three headwinds to send crude oil into free fall , (d) Harnessing gains from mean reversion in crude oil markets , and (e) Rebounding air travel & rising China to fire up WTI crude. In our next paper, we describe the mechanics involved and illustrate the workings of popular trading strategies. KEY TAKEAWAYS In conclusion, 1. The Crude oil market is at the cusp of substantial change as energy transition powers on. 2. Change will be a constant. Impact on price will be anything but a straight line, creating both risks for the uninitiated and opportunities for the astute. 3. CME Group’s deeply liquid market with broad range of instruments enables market participants to harvest gains in risk-mitigated ways and to lock in credible reward to risk ratios. MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
NYMEX:CL1!
by mintdotfinance
1
Why Russell Index the most Reflective for Bank Run Crisis?Russell represents the true economy of United States. There are 2,000 medium size companies with each value between $300m to $2b. The index includes a diverse range of companies from various sectors, including financials, healthcare, consumer goods, industrials, and technology. In my opinion Russell represents the true economy of united states. If the bank run crisis deepens, it is possible that 2,000 companies will not hold up well. The reasons for this are stated in the video. This could affect the other major indices, with the Russell 2000 potentially leading the pack. The Russell 2000 is considered more reflective of the US economy compared to the other major indices with big names like Apple, Amazon, and Microsoft. E-mini Russell 2000 Index Futures & Option Outright: 0.10 index points = $5.00 Micro E-mini Russell 2000 Index Futures Outright: 0.10 index points = $0.50 Micro E-mini S&P 500 Index Futures & Option Outright: 0.25 index points = $1.25 Micro E-mini Nasdaq Index Futures & Option Outright: 0.25 index points = $0.50 Micro E-mini Dow Jones Industrial Average Index Futures Outright: 1.0 index points = $0.50 Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CME_MINI:RTY1!Short
by konhow
18
CME Gaps: Don't Ignore Them... How often have you heard this term “CME gap” on Twitter, Reddit and other social media platforms. People usually refer to CME gaps during and after the weekends. “There is a CME gap at $9800”, “Bitcoin is about to make a huge gap on the CME chart”, “gap has been filled” and so on. What is CME CME stands for Chicago Mercantile Exchange. It is the world’s largest financial derivatives exchange. This futures platform allows one to trade variety of asset classes like: agricultural products, energy, stock indices, fiat currencies, interest rates, real estates, metals and even they have futures trading options for weather. What is a GAP To put it plainly; A gap is simply an area on a chart that has no trades. It is basically an empty space between the close and open price of an asset. You can see the current gap just filled down at 19k-20k last week. CME Bitcoin futures gap: Bitcoin (BTC) is being traded 24/7 on majority of crypto exchanges, but not on CME. Bitcoin does not trade during weekends on CME and this causes gap on CME chart once the trading resumes on the platform. The CME gap on Bitcoin typically occurs when the price of Bitcoin moves after the CME futures market is closed. Once CME opens; the trade on CME resumes at the same price as other Bitcoin exchanges thus creating a gap on the CME chart. Why do they fill? Price gaps getting filled is not just a CME phenomenon and is not just a Bitcoin thing. It’s a common occurrence that can also be seen quite regularly within stock and traditional markets. In most cases the price tend to fill the gaps and due to this many technical analysts consider gaps when doing price analysis. But why do they fill? In physics there is a famous saying: “Nature abhors a vacuum“. This idiom is used to express the idea that any unfilled, empty spaces are unnatural and goes against the laws of physics and nature. This is based on Aristotle’s observation. Nature contains no vacuums because the denser surrounding material continuum would immediately fill the rarity of an incipient void. Could this possibly be the reason why the gaps are getting filled? Well, there are several different theories regarding this but the fact is no one exactly knows why gaps fill. Trading based on BTC gaps Although CME accounts for a large portion of BTC traded volume, the price of Bitcoin does not necessarily gravitate towards CME gaps. There are so many other factors such as Volume, momentum, buy / sell pressure, technical structures, support / resistance and many more.Traders consider gaps as an interesting marker on a chart. But they don’t necessarily trade on as they are not always a reliable indicator. They have high hit rate and so using them on your technical analysis will help you position yourself on the right side of the trade. However taking a trade solely based on this one factor is a wrong move. Trading gaps seems like an easy strategy but the risks are high and in most cases you’ll be on the losing side. So do not risk your trade account with just this one strategy. Use proper risk management, set stop losses and be sure to trade safe. Apart from this there are other types of gaps which traders use in their technical analysis like for example: Liquidity gap, Breakaway, Balanced price range, Fair Value gap and so on... I have located all the 'Unfilled' CME BTC gaps in the chart...
CME:BTC1!
by TraderE9
3
Interest Rates are Moving Again - Breaking Above Recent High2 year, 5 year, 10 year and 30 year yield are all showing a similar characteristic: · Low established in 2020 · Major support trend started forming since then · Seem to have completed its retracement with a double-bottom · Resuming on its major support trend · Target to break above its recent all-time high set on Oct 22 Chart illustrated a 10 year yield futures market. Interest rates and yield moves in tandem, why? Borrowers (for eg. home owners with loan) take reference from interest rates and lenders (or investors) take reference on the yield. Interest rates and yield moves in tandem. Meaning if yields are indicating an upward momentum driven by mainly the investors, interest rates will soon to follow or vice-versa. Though interest rates are making a U-turn from its recent low and breaking above its all-time high. Are you seeing opportunity or feeling stress with more volatility ahead? My strategy: • Have lesser long-term hold on stocks • Trading into the indices - Sell into strength and trading into the volatility • Investing into commodities related asset • Buying into dip(s) on yield futures CME Micro Years Yield Futures Minimum fluctuation 0.001 Index points (1/10th basis point per annum) = $1.00 Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CBOT_MINI:10Y1!Long
by konhow
Is USD rebounding or reversing?Thanks to a strong January employment report, the greenback made an impressive comeback from the weakness since Q4. Someone might expect the strength could persist and even test 2022’s high, but I regard this as a rebound and the dollar will likely trade in a range between 100 to 108 (Dollar Index basis) in 1H 2023. First of all, the strength of greenback last year mainly came from an aggressive rate hike by Federal Reserve that kept the bond yield evaluated and widened the yield differential. As the chart shown, the yield differential of 2-year bond between US and German kept widening since 2H 2021 and reached the peak at Q3 2022. In the meantime, the dollar was on the uptrend against euro and other major currencies. When there was expectation the Fed will slow the hike pace, and ECB was becoming more hawkish to tackle inflation, the yield differential narrowed since Q4 that caused the weakness of dollar. After the FOMC meeting and before the employment report, the market downplayed the need for Federal Reserve to hike rate and even expected a rate cut by the end of this year in response to possible recession, turned a deaf ear to what J. Powell was delivering. Disinflation he mentioned is a term describing the inflation is dropping, which is nothing new that we can see from the inflation data (Benchmark, Core or PCE) in the last few months, and didn’t mean the inflation have dropped to the target level. His remark on 7 Feb about rate could be hiked to a level higher than market expectation showed there are more works Federal Reserve need to do. The strong employment report reminded investor inflation is still a major risk to the economy and the Federal Reserve might need to hike further to contain inflation. Market’s expectation on the “terminal rate” revised upward and the bond yield moved higher that contributed to the rebound of the greenback in the last few days. There are many factors affecting the movement in FX market, but the yield differential seems having a dominant effect in the last few quarters and could be the factors to watch in 1H 2023. I keep my conviction the Fed Funds rate will peak at 5.00% (lower band), which mean two more 25bp hike is coming. However, the hiking pace of ECB is even more hawkish and a 50bp rise is expected in their next meeting, and more could follow after. The higher and stubborn inflation in eurozone could make ECB keep hiking rate even if Fed paused, that might translate to narrower yield differential that is not positive to the greenback. Another interesting area to note is the yield of US 2-year note. The inversion of yield curve is implying a recession, but what if US can avoid recession, especially when the US job market is surprisingly impressive? Assuming US will not have recession, the yield spread between 2-year and 10-year bond should narrow, then how will they move respectively? A normal yield curve is 10-year yield higher than 2-year yield, while I don’t think 10-year yield will have the potential to rise to 4.5% or higher due to disinflation and technical reason, there is not much room for 2-year yield to rise further and even has a potential to retreat. A lower 2-year yield will lower the yield differential against other major currencies, that is negative to the USD. Even US 2-year yield revisit last Nov’s high, the German 2-year yield have risen 50bp from that level already. Since the rebound of the greenback released some overbought pressure and created a better entry point, you might consider a long position on EUR(6E) now, a short-term (1M) target at 1.1000 and a longer-term (1H) target at 1.1500. Stop loss could be set at 1.0500. If you disagree with me and believe the greenback in a reversal mode, you might consider a short position in gold since it could face further pressure after recent correction since it still accumulated meaningful gain in the last few months. Disclaimers Above information are for illustration only and there is no guarantee on the accuracy of the information. They should not be treated as investment recommendations or advices. CME Real-time Market Data help identify trade set-ups and express my market views. If you have futures in your trading portfolio, check out on CME Group data plans in TradingView that suit your trading needs www.tradingview.com
CME:6E1!Short
by FOTrading
Bitcoin CME Report for Tuesday 17 Jan 2023 to Tuesday 24 Jan 202CME Overview: Bitcoin and crypto, in general, have had a major run starting most significantly since the start of the new year. BTC1! Is the Bitcoin Chicago Mercantile Exchange Futures trading and comprises significant institutional trading of Bitcoin. The most significant data we use in this report are from the Dealer and Intermediaries which are the Exchanges and Brokerages as well as the Asset Managers the latter of which has been longing the 2021 all-time high and subsequent bear market to their peril. The report that comes out on Fridays shows the actions that occurred by position from the previous Tuesday to the Tuesday before that. This current report shows a week-long snapshot of CME positions on Bitcoin from Tuesday the 17th of January to Tuesday the 24th of January. New reports are released on the following Friday after the market closes. Bitcoin CME Report for Tuesday 17 Jan 2023 to Tuesday 24 Jan 2023 From the 17th to the 20th of January price increased from $21.2k to $22.4k before a 2-day break for the weekend. Most notably from Monday the 23rd and Tuesday the 24th the CME gapped up, meaning that the close price from Friday (CME closes for weekend trading) the price of Bitcoin increased from $22.4k and opened on Monday at $22.6k. This creates a “Gap”, and by rule, gaps do not have to be filled however probability says they have a higher fill rate than not. That weekend gap has now been taken out completely however a gap from the 14th and 15th of January largely still exists between $19.9k and $20.4k with a massive and older gap from the 12th and 13th of June 2022 above us at $27.4k and $29.1k. Dealers and Intermediaries are Extremely Short Short Positions: In the current reporting period, we see that Dealers and Intermediaries (The Exchanges / Brokerages) increased their longs by 101 positions bringing their total long positions to 304 while still adding 726 short positions bringing their total short positions to 4,346. This is very different from what usually occurs in relation to lower timeframe price action as we see Dealers and Intermediaries usually adjusting their positions more regularly to catch the Major Moves. As the price has increased in this period this is the most significant adding of short positions by the Dealers and Intermediaries that we have seen since the end of March 2022 when Dealers and Intermediaries massively shorted to force a Q2 open underneath the Q1 open and thereby wrecking quarterly options. Dealers and Intermediaries are now 93.4% short. Asset Managers are still largely out of Position and Entirely Long Long Positions: The other interesting figure from a more accurate perspective is how out of position the Asset Managers have been in the last year plus as they began heavily building longs at the highs in the fall of 2021 and now they have begun to heavily increase their positions in this weeklong period by a further 644 positions to a total of 7,671 long positions and closed 243 short positions leaving only 63 short positions total for asset managers. This means that compared to short positions Asset Managers and Institutions are 99.2% Long with relatively zero shorts. Summary This most recent COT report is interesting as it shows Asset Managers and Institutionals are only long at the same time as we have had good market movement to the upside with each level creating support. The Asset Managers and Institutionals are entirely in Long positions as they added massive longs that are/were out of position going back to November of 2021 and throughout the 2022 bear market. Bitcoin is still holding key levels however, the extreme bearish sentiment is starting to dissipate as Bears are being and have been punished in every range and consolidation period. Every continuous move-up was met by heavy shorting from retail thus providing more liquidity to move price upwards. This is now starting to change as Retail is beginning to add longs in this previous weekly range while shorts were squeezed out of position on Wednesday. The gap down at $19.9k to $20.4k is still in place and breaking any significant structure above still allows the market to capitalize on taking out later longs that got into position over $20k which have yet to be punished. The upside move is still in play until support is broken, a new gap that could be formed come the Monday open on Jan 30th would potentially provide an incentive for market movement as we open the week. Late Longs have not been significantly punished as heavier liquidity is building below us. That being said the weekend trading can decide quite a bit if we start closing 4hr or daily levels below the Weekly Open at $22.6k. The confirmed loss of this level will potentially allow us to short higher up and at the failure of the structure. Shorts have also already been punished and Longs have been by all accounts allowed to keep positions as heavy support still exists. All eyes are on the FOMC interest rate decision on Wednesday the 1st of February, with the forecast being an increase of .25% from 4.5% to 4.75% which should be a catalyst to move the market should the forecast not meet the decision. Retail is starting to flip their bias long just as the Asset Managers have both of whom have been largely on the wrong side of the market for well over a year. Conversely, the Dealers and Intermediaries have been largely correct in their positions and their massive adding of shorts in this area which should not be taken lightly as they have been right throughout the bear market. Our thoughts about the Dealers and Intermediaries are simple, don’t bet against them, they have all the data and see all the positions.
CME:BTC1!
by TrendmasterOfficial