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Time to Buy BTC: USA Debt Negotiations and its Impact on BitcoinToday, I want to discuss the USA debt negotiations and their potential impact on Bitcoin. As you may know, the United States is facing a severe debt crisis, and the government is currently negotiating a solution. This has caused much uncertainty in the market, with many investors wondering what the future holds for various assets, including Bitcoin. However, there is good news for us Bitcoin investors. Historically, Bitcoin has performed well during economic uncertainty and political turmoil. As a result, Bitcoin has often been referred to as a " haven" asset, which means it tends to hold its value or even increase in value when other assets are experiencing volatility. So, what does this mean for us? First, it means there is a good chance that Bitcoin will go up after the USA debt negotiations are concluded. As a result, investors may turn to Bitcoin to protect their wealth during uncertain times. Additionally, the fact that Bitcoin is a decentralized currency not tied to any government or financial institution makes it an attractive option for those concerned about the stability of traditional money. As a Bitcoin investor, this is an exciting time for us. We could capitalize on the potential growth of Bitcoin and increase our wealth. So, I encourage you to act and buy Bitcoin now before the price goes up. If you're new to Bitcoin, don't worry! There are many resources available to help you get started. You can find information online, join Bitcoin communities, or even talk to a financial advisor specializing in cryptocurrencies. In conclusion, the USA debt negotiations may positively impact Bitcoin, and as investors, we should take advantage of this opportunity. So, let's buy Bitcoin and watch our wealth grow!
BITSTAMP:BTCUSDLong
by bryandowningqln
Macro Catalysts Looming over BTCThere are several macro catalysts looming that are expected to play out in the next days and next couple of weeks. - DEBT Ceiling - FEDNOW launch - SEC vs Ripple FED and US TREASURY - DEBT Ceiling The United States Treasury is going broke, the FED is broke and banks are crumbling. The market crash actually started back in September 2019 when the yield curve inverted (www.investopedia.com). The "Debt ceiling" cannot be raised indefinetly and at some point US will most likely have to default unless they reach a deal like they did in 2011. Image 1: fred.stlouisfed.org The FED is basically a bank that has assets and liabilities. Their profits are funnelled into the US government. Since August 2022 they have recorded over $60 billion in losses. Image 2: Image 2 The balance sheet of the Treasury shows how much money the US government has. After the COVID printer went crazy the balance sheet reached $1.8 trillion and has now plummeted to $100 billion. The US government is the ultimate PONZI, in order to pay their debts they need to keep borrowing. To make it worse the borrow estimates for Q1 2023 where about $500 billion but ended up being double that at about $1 trillion. This goes to show how the US is no longer in control and cannot predict what is to come. Image 3: www.bloomberg.com Bloomberg did a piece on Gold and assets that according to their survey will do well if US defaults. Data is based on 670 participants. Interesting to see that Bitcoin is considered to be a good BUY in that event. During a financial crisis, commodities such as Gold, Silver and Platinum have been the "go to" assets along with the YEN and Swiss Franc. It seems like Bitcoin is moving from a Risk-On asset to more of a commodity. FEDNOW Launching www.federalreserve.gov Another important upcoming catalyst is the FEDNOW banking system which goes live July 1st. This is kind of a precursor to CBDC. The question here is, how well will this function and is there any risk of bugs? All software is vulnerable, and a small bug can lead to huge implications because banks will not be able to move money if a bug happens. It is important that the system runs smoothly because on the same date another major catalyst is at play. - LIBOR to SOFR transition. LIBOR (London Inter Bank. Overnight Rate) is a group of banks that determines the interest rate on loans, this has been done in London as per the LIBOR The US wants to move to SOFR (Secured Overnight Financing Rate) , they want to have more control. We are talking about approximately $650 trillion worth of assets that will have to migrate. The rate on the SOFR is set by the Overnight Rates. Taking the FEDNOW and SOFR together, if a bug happens with the FEDNOW software, banks will not be able to move money. This would mean that the Rates will skyrocket. SEC vs RIPPLE - Hinman documents cointelegraph.com Another potential catalyst is the 2.5 year long case between SEC and Ripple. Recently Ripple convinced the court to force the SEC to reveal the Hinman documents. Hinman is a former SEC director who reportedly stated that ETH is not a security because "it is sufficiently decentralized." But since the documents are sealed it is uncertain what is exactly ment by this statement. Ripple believes revealing this document can help them win their case. Ripple winning this case could potentially be one of the most bullish catalysts to have impacted the crypto market. The public release was supposed to be June 6 but is now set for June 13. Important Dates: JUNE 1 Yellen states that it is likely that the treasury will not be able to satisfy all obligations as early as June 1 JUNE 13 - Hinman Documents made public - Inflation figures for May released JUNE 14 - FED announcement on interest rates decision JULY 1 - LIDOR to SOFR migration - FEDNOW launches
by Suneater69
SPY: FLUSH OR RALLY / MARKET BREADTH / MARKET MAKERS TIMINGDescription: In the chart above I have provided a semi-macro analysis of SPY that compares ongoing market rally and past rallies within the range of 420 & 360 Points. Points: 1. Price Action is fast approaching 420 Resistance that has been indicative of a turn around for past 4 rallies that failed to break the 420 LEVEL. 2. First 2 rallies under the 420 Level showed signs of congruence when it came to market breadth and price action. 3. Last 3 rallies including current one has shown divergence with market breadth along with a distinct pattern of consolidation that is followed by a sudden drop in price action. 4. It is important for price action to have another leg even if current uptrend is continued. First Price Target: 404.64 Bouncing Support Second Price Target: 400 Critical Support Market Breadth: 1. Showing strong signs of divergence with average price action continuing to rise. The Tech Sector is mainly responsible for the upholding of this rally with giants like AAPLE, NVIDIA, AMD, AMAZON, META, & GOOGLE fighting against bearish momentum. 2. For the majority of US INDICES Tech companies like AAPLE, NVIDIA, AMD, AMAZON, META, & GOOGLE represent a large majority of the holdings within many US INDICES. So it is no coincidence for why market breadth may appear weak when only a couple holdings are contributing to rallies meanwhile a large majority of the holdings are in the red. 3. Market Breadth Levels of 4200 have been indicative of volatile declines in price action in the past with an average incoming 10 POINT DECLINE over a day or two. FULL CHART LINK: www.tradingview.com AMEX:SPY
AMEX:SPYShort
by DGSTBROKERACC
GBP/USD edges lower, markets eye UK retail salesGBP/USD continues its downswing. The pound is trading at 1.2340, down 0.20% and is at a one-month low against the US dollar. The UK releases retail sales for April on Friday. On an annualized basis, the headline and core readings are expected to decline by 2.8% in April, which would indicate that UK consumers continue to hold tight onto the purse strings. Consumers are having a tough time with the cost of living crisis, with inflation at 8.3% and a weak reading could weigh on the pound. The US debt ceiling impasse remains unresolved, with the White House warning that the US could default on its debt on June 1st if no deal is reached in Congress. The markets are jittery and US 10-year Treasury yields have jumped to 3.75, up 1.1% today. The US dollar has also benefited from the debt ceiling crisis as investors have snapped up safe-haven assets. On Wednesday, Fitch Ratings put the top-ranked United States sovereign credit rating on "rating watch negative" due to the danger of a US debt ceiling default and we can expect market risk sentiment to continue falling as we move closer to June without a deal in place. The FOMC minutes indicated that the Fed remains unclear over future rate policy. At the May meeting, some members said there was a need for further increases as inflation was not falling fast enough. Other members argued that the economy was cooling and there was no need for more tightening. All the members agreed that inflation remains too high and the vote to raise rates by 25 basis points at the May meeting was unanimous. So what's next? The Fed meets on June 14th and appears to be leaning towards a pause in rate increases. The odds of a pause are currently 62%, versus 37% for a 25-bp hike, according to CME's FedWatch. Just a month ago, the probabilities were 70% for a pause, 8% for a 25-bp hike and 22% chance for a rate cut of 25 basis points. A hawkish Fed and solid US data have put to rest market speculation of a rate cut next month. Speaking of solid economic data, US Preliminary GDP rose 1.3% y/y in the first quarter, up from 1.3% in Q4 2020, which was also the estimate. On a quarterly basis, GDP climbed 4.2%, above the estimate of 4.0% and after a Q4 gain of 4.0%. Unemployment claims rose to 229,000, following a previous reading of 225,000, which was downwardly revised from 242,000. This easily beat the estimate of 245,000. The Fed will not be thrilled with these numbers, as it needs the economy to cool in order to wrap up the current rate-tightening cycle. GBP/USD tested support at 1.2375 in the European session. Below, there is support at 1.2307 1.2461 and 1.2529 are the next resistance levels
by OANDA
2
Debt Ceiling Deadline Likely to Whipsaw the Markets - Day 3S&P 500 INDEX MODEL TRADING PLANS for WED. 05/24 We started this trading week with our trading plans on Monday titled: "Debt Ceiling Deadline Likely to Whipsaw the Markets", and these words: "Expect the approaching debt ceiling deadline to attract both bulls and bears to heightened speculation, resulting in some whipsaw movements until the deadline passes and the dust settles". Third day into the week, those indications from our models have played out to the letter! Thank you for our loyal readers who have reached out with words of appreciation! We strive to share what we see through the lens of our models, regardless of what the markets might appear to be doing - some days we hit the nail on the head, and some we might miss the nail altogether, but overall our goal is to help our loyal followers gain alpha in their trading performance paralleling that which is being demonstrated since 2018, Dec in our models' performance history. Let your outperformance not lead to overconfidence, though, for overconfidence is shown to be one of the biggest enemies of even the best traders. Our stance last few weeks has been: "Our models are indicating an initial bias towards an inflection point coming soon. Barring any unexpected bullish development showing up on the horizon, chances are that this could be unwinding to the downside". With the debt ceiling drama in high gear, expect the market volatility to continue to increase. Positional Trading Models: Our positional models have initiated the following standing trading plan exactly one week back, on Wed 05/17: "indicate going short at the close if today's close is to be below 4147 (activated at 3:59pm). If opened a short, models indicate instituting a hard stop at 4187". This trading plan was triggered at yesterday's close, and now our positional models are short SPX at 4146.33 with a hard stop at 4187 as indicated in our results last night. By definition, positional trading models may carry the positions overnight and over multiple days, and hence assume trading an instrument that trades beyond the regular session, with the trailing stops - if any - being active in the overnight session. Aggressive/Intraday Models: Our aggressive, intraday models indicate the trading plans below for today. Aggressive, Intraday Trading Plans for WED. 05/24: For today, our aggressive intraday models indicate going long on a break above 4162, 4150, 4131, 4113, or 4103 with a 9-point trailing stop, and going short on a break below 4157, 4141, 4126, or 4109 with a 9-point trailing stop, and going short on a break below 4098 with a 6-point trailing stop.  Models indicate explicit long exits on a break below 4145, and short exits on a break above 4145. Models also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 12:46pm ET or later. By definition the intraday models do not hold any positions overnight - the models exit any open position at the close of the last bar (3:59pm bar or 4:00pm bar, depending on your platform's bar timing convention). To avoid getting whipsawed, use at least a 5-minute closing or a higher time frame (a 1-minute if you know what you are doing) - depending on your risk tolerance and trading style - to determine the signals. (WHAT IS THE CREDIBILITY and the PERFORMANCE OF OUR MODEL TRADING PLANS over the LAST WEEK, LAST MONTH, LAST YEAR? Please check for yourself how our pre-published model trades have performed so far! Seeing is believing!)  NOTES - HOW TO INTERPRET/USE THESE TRADING PLANS: (i) The trading levels identified are derived from our A.I. Powered Quant Models. Depending on the market conditions, these may or may not correspond to any specific indicator(s). (ii) These trading plans may be used to trade in any instrument that tracks the S&P 500 Index (e.g., ETFs such as SPY, derivatives such as futures and options on futures, and SPX options), triggered by the price levels in the Index. The results of these indicated trades would vary widely depending on the timeframe you use (tick chart, 1 minute, or 5 minute, or 15 minute or 60 minute etc.), the quality of your broker's execution, any slippages, your trading commissions and many other factors. (iii) These are NOT trading recommendations for any individual(s) and may or may not be suitable to your own financial objectives and risk tolerance - USE these ONLY as educational tools to inform and educate your own trading decisions, at your own risk. #spx, #spx500, #spy, #sp500, #esmini, #indextrading, #daytrading, #models, #tradingplans, #outlook, #economy, #bear, #yields, #stocks, #futures, #inflation, #recession, #fomc, #fed, #fedspeak, #regionalbanks, #debtceiling
SP:SPX
by TradersAIDotCom
US30 POSITIVE - DEBT CEILING OUTCOMEOverall on Indics we have seen price range, investor and banks are waiting to hear what the USA will do on the debt ceiling crisis. As we have previously seen that with positive news on the debt ceiling the markets will rise, and with negative news on the debt ceiling markets will drop ( potentially 45% based off analysts at JP Morgan) If we get positive news on the debt ceiling I am seeing this potential swing trade happen - also an inverse H&S on the daily timeframe. If news is negative then we will most likely see price drop, retesting the head support and potentially dropping even more. If you like my ideas please like and share, support on our Dserver ill be much appreciated!
BLACKBULL:US30Long
by crownclubfx
4
GBP/USD dips after disappointing UK inflationGBP/USD is down for a third straight day, trading at 1.2374, down 0.33%. Earlier, GBP/USD touched a low of 1.2369, its lowest level since April 18th. The FOMC releases the minutes of the May meeting later today. The closely-watched UK inflation report for April was a disappointment. There was some good news as headline inflation fell to 8.7%, down sharply from 10.1%. Hopefully, this is the end, finally, of inflation in double-digit territory. Still, the reading was above the estimate of 8.2%. There was nothing positive about core CPI, which is the more important gauge of inflation. The core rate jumped from 6.2% to 6.8%. Forecasters had expected core CPI to remain at 6.2% and the unexpected rise is clearly a big step backward for the Bank of England in its tenacious battle with inflation. Governor Bailey is speaking at two public engagements today, and we can expect him to make mention of the inflation report. The BoE has raised rates by 1% this year, bringing the cash rate to 5.25%, but inflation has proven to be persistent. The IMF has projected that UK inflation would fall to around 5% by the end of the year and drop to the 2% target by the middle of 2025. It will be a bumpy road to restore low inflation, and the BoE will probably have to raise rates again in June, unless core inflation surprises dramatically on the downside. US lawmakers continue to fight over the debt ceiling, as US Treasury Secretary Yellen has warned that the ceiling could be reached on June 1st, which doesn't leave a lot of time for an agreement. Republicans have said Yellen's date isn't accurate, but even if the deadline is a week or two later, Congress seems to be playing with fire to score political points. Investors are worried, and stock markets are down while safe-havens such as gold and the US dollar are higher. We've seen this movie before, and Congress has always reached a deal before the deadline. Still, we can expect risk sentiment to slide and the US dollar to gain ground the longer we go without a deal. GBP/USD tested support at 1.2375 in the European session. Below, there is support at 1.2307 1.2461 and 1.2529 are the next resistance levels
by OANDA
GBP/USD drifting lower ahead of UK inflationGBP/USD is trading quietly at 1.2423, down 0.11% on the day. UK inflation has been a thorn in the side of the Bank of England for months and is still above 10%. The UK releases the April inflation report on Wednesday and relief may finally have arrived. Headline CPI is expected to fall from 10.1% all the way to 8.3% y/y. That would be welcome news, but core CPI, which is a better gauge of inflation trends, is projected to remain unchanged at 6.2% y/y. Bank of England Governor Bailey reiterated today in testimony before the Treasury Select Committee that inflation has turned the corner, and we'll know if he's correct on Wednesday. Even if inflation surprises to the downside, it will be miles higher than the 2% target which Bailey has pledged to reach. That means that more rate hikes are likely until both headline and core inflation show rapid declines. Bailey received some good news from the International Monetary Fund, which revised upwards its growth forecast for 2023 from -0.3% to +0.4%. This means that the UK economy, while still struggling, will avoid a recession. The IMF projected that UK inflation would fall to around 5% by the end of the year and drop to the 2% target by the middle of 2025. The US dollar is higher against most of the majors today, as investors remain concerned about the US debt ceiling standoff. The Democrats and Republicans continue to negotiate, with a June 1st deadline just a week away. The yield on the US 10-year Treasury notes has risen to 3.75%, its highest level since March. This has given a boost to the US dollar and yields could continue to push higher the closer we get to the deadline without a deal. The United States government has never defaulted on its debt, and a deal is likely to be hammered out before the deadline. There is support at 1.2307 and 1.2221 1.2375 and 1.2461 are the next resistance levels
by OANDA
On the Verge of a Global Market TsunamiCME: Chinese Yuan (CNH) Euro FX (6E), Micro S&P (MES), Micro Nasdaq (MNQ) The US government is within ten days of defaulting on its debts. If this unprecedented catastrophe were to happen, what could it trigger? Risky assets, from stock, bonds, FX, to commodities, will go through a violent period of reset and repricing. Weaker economies could be hit hard if the crisis prompts a flight of financial assets out of the country. Gold could reach a new record as the primary safe haven asset. Bitcoin and other crypto currencies could also be a winner. US dollar and Treasury bonds, which lies at the core of this market turmoil, could actually gain from it. Past crises show that investors could pick them as the “least bad” option in a flight to safety. US Government Financials in a Glance The federal government is in very bad shape, financially. Data released by the Treasury Department shows that: • The total national debt through May 18th is $31.46 trillion; • In 2022, US collected $4.90 trillion in revenue and spent $6.27 trillion, contributing to a budget deficit of $1.42 trillion; • In fiscal year 2023 to date, we have $2.69 trillion in revenue and $3.61 in spending, and already created a budget deficit of nearly $1 trillion; • Interest rate on national debt has been creeping up since the Fed rate hikes, and reached 1.89% by December 2022; • Treasury operating bank account has a cash balance of $316 billion. The low cash balance is shocking. At a burn rate of $523 billion a month, it could only support government spending for 18 days if no new revenue comes in. It is not enough for 6 months of interest payments on debt, left alone paying down the debt. Where We Are at the Debt Ceiling Negotiation On May 15th, in a letter addressed to House Speaker Kevin McCarthy, Treasury Secretary Janet Yellen warned of the looming catastrophe: “We still estimate that Treasury will likely no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1.” The GOP controlled Congress passed a responsible debt limit increase bill last month, but it was rejected by the White House due to its budget constraint requirements. The two sides are sitting down at the negotiating table last week. But the talks are not going smoothly. House Speaker McCarthy complained about the lack of sincerity from the President who takes overseas trip at the blink of government bankruptcy. It is still possible to reach a last-minute deal, but a default is no longer unthinkable. Event-Driven Trading Strategies In the past, I set up event-driven strategies with Game Theory and Binomial Tree. I think it is useful to discuss two of them before introducing the current strategy. During the US-China trade conflict in 2019, I used COMEX Gold Options to replicate the risks that global markets would be up against with. “When Trump tweets, Limit Up.” “When Xi calls, Limit Down.” The former shows the tariff fight to intensify, the risk goes up, and so is gold price. The latter indicates that the two sides would engage in negotiation, the risk to deescalate, and gold price will go down. In the midst of the Russia-Ukraine conflict, I picked CBOT Wheat to replicate the risks to global food supply. The two countries collectively account for 28% of global wheat export. To predict the probability of conflict outcomes is difficult but unnecessary. Long Strangle options strategy would buy out-of-the-money call and put options simultaneously. It would make money if wheat price had a big move, either up or down. At the time, $12-strike call was priced three times higher than $9-strike put. The conflict dragged on, but Turkey brokered a deal to allow Ukraine to ship grain cargoes through the Russia-control Black Sea. Wheat futures fell 28% and the Put value went up 1749%. The links to the above two trade ideas are available at the end of this writing. Opportunities amid Catastrophes Taking a one-step binomial tree, the early June debt limit deadline could be expressed in two outcomes: Deal, or No Deal. In the first outcome, a deal to raise debt limit is reached. Investors are relieved and risky assets shall go up in general. In this case, there are no low-hanging fruits to pick. I am more interested in the second outcome. The talk breaks down. Financial markets freeze up. Panic selling would push good assets into oversold bargain prices. Here is my thinking: Would the US government turn into a deadbeat if no deal is reached? Take a look at the annual federal budget showdown. Talk broke down triggered government shutdown. Millions were furloughed and bills were not paid on time. But when the resolution is reached, the federal workers got called back, and the pass-due bills would all be paid. Since January, the Treasury Department has been operating in a crisis mood. Legal obligations are still paid on time, while other lower priority spending get pushed back. A No-Deal scenario would result in more payment delay and some furlough. My conviction is that a “US Default” would be a technical one, and all the government obligations would be satisfied eventually. There are many means to ensure this outcome. In my April 17th writing, I explained that the top 1% of income earners paid 42% of all federal income taxes. Raising tax to the riches would anger 1% of voters but may gain support from the remaining 99%. This is an easy political decision. Ultimately, all US debts are based on US dollar. We have the money printing machine ready, and it only needs authorization to turn on. A US default would be a good reason. If a US default occurs, I expect an emergency solution to be reached within days. In addition, the Fed would definitely stop raising rates in its June 14th meeting. When to Start Bargain Hunting On the day of US default and a week after, market chaos would present many buying opportunities. What considered a bargain? For major stock indexes, a one-day drop of 5% or a one-week drop of 10%. CME Micro S&P 500 futures (MES), Micro Nasdaq 100 Futures (MNQ), Micro DJIX Futures (MYM) and Micro Russell 2000 Futures (Y2K) are all good choices. For individual stocks, the threshold goes up to 10% a day and 20% a week. We all have our favorite stocks on our wish list and were previously turned away by their lofty prices. A big crisis could turn them into bargains, with limited negative impact over time. For foreign exchange, I would focus on CME Euro FX (6E), British Pound (6B), Japanese Yen (6J) and Chinese RMB (CNH) futures. I think the Dollar could take an immediate beating whenever the news of default hits the wire. However, as soon as a resolution is reached, full faith and credit of the Green Back would be restored. This may give us a few days of opportunity window for bargain trading. The minimum tick in FX quote is a “pip”, which is the fourth digit after the decimal point. The daily range of price move for the above-mentioned currency pairs is between 30 to 80 pips. My threshold for bargain is a 200-pip daily move and 500-pip weekly move. Let's take a look at the CNH exchange rate. It experienced four distinguish trends recently: • Stable rate: Stayed in a tight range of 6.3-6.5 yuan per dollar before March 2022; • Fast depreciation: Strict Zero-Covid policy pushed the yuan down to 7.3; • Fast rebound: Reopening in October ignited hope of economic expansion, and the yuan quickly bounded back to 6.67 in two months; • Fast depreciation: The “Wondering Balloon” incident abruptly stopped the yuan’s rise. Disappointing recovery data sent the RMB into falling again. June futures quotes 7.0325 in the morning of May 22nd. I think that the Chinese government would like to see the yuan weakened to aid its export. The down trend could continue, and the yuan may retouch 7.3. If the US dollar fell against the yuan by 500 pips, for example, from 7.0325 to 6.9825, it would be a good point to establish a long position, in my opinion. Each CNH contract has a notional value of $100,000. When the exchange rate moves 1 pip, a futures position would gain or lose 10 yuan. CME requires initial margin of $21,100 per contract. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups 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:6E1!Long
by JimHuangChicago
1
The Debt Ceiling The debt ceiling in the US is a legislative limit on the amount of national debt that can be incurred by the U.S. Treasury. President Biden and House Speaker Kevin McCarthy are set to hold a direct meeting on Monday following a weekend of intermittent negotiations regarding the nation's debt ceiling. This meeting takes place just days before the government faces a critical "hard deadline" where it risks running out of funds to meet its financial obligations. The possibility of a government default is unprecedented and would have devastating consequences for the nation's economy. Yellen and economic experts have expressed concerns, highlighting the potential for the situation to become "catastrophic." In the past, raising the debt ceiling used to be a routine act carried out by Congress, enabling the Treasury Department to continue borrowing funds to cover the nation's already incurred bills. However, in recent times, the vote to raise the debt ceiling has become a point of political leverage, with lawmakers using it as a must-pass bill to push forward other priorities. House Republicans, who hold the majority this Congress, are currently refusing to raise the debt limit unless President Biden and the Democrats agree to implement federal spending cuts and impose restrictions on future spending. In my opinion, we will see a suspension of the debt ceiling to allow for negotiations to form and be completed. As a result, I have a short-term bullish outlook, followed by an anticipated drop to $392 after the announcement, whatever it may be. Looking forward to read your opinion about it!
AMEX:SPYShort
by TopgOptions
Frothy TimesLast Wednesday, inflation prints (CPI) came in below expectations of a ‘hot’ print which would have likely indicated that the Federal Reserve will continue tightening rates. Cryptocurrency and equities markets reacted positively while bond yields dropped. These numbers are expected to persuade the Fed to lean more towards a "pause" stance for its next FOMC meeting in June. Meanwhile, markets are still concerned about the debt ceiling crisis as negotiations have not shown much progress as of yet. Despite the name, this crisis is actually more of a political issue as it hinges on a piece of must-pass legislation which would allow the federal government to increase its borrowing to fund its spending obligations. The Democrats currently have control of the Senate, while the Republicans have gained a majority in the House of Representatives. As such, they have used the debt ceiling as a political bargaining chip, pushing for cuts on what they deem as "irresponsible spending". Unless a compromise is reached, it’s likely that caution will echo throughout markets. Currently, the U.S. is forecast to hit its debt limit in early June. If the United States defaults on its debt for the first time in history, tens of billions of dollars in payments for Social Security benefits, payments to Medicaid providers, federal salaries, veterans' benefits, and other programs could potentially be at risk. As a result, investors are finding it challenging to decide on a trade amidst the uncertainty surrounding the debt default and resolution. Macroeconomic theory would predict that a resolution to increase the debt ceiling would reign in government spending, thus putting downward pressure on bond yields, thereby making the purchase of bonds at the current yields more attractive. Additionally, S&P500 earnings yields currently sit around 5.5% while risk-free 1-month U.S. Treasury Bills are paying the same. This makes holding stocks potentially less enticing to many investors and could serve as a rationale for shorting equities. From a technical perspective, since Bitcoin lost the $30K level, it has proven difficult to reclaim. The market has tested the level twice and has so far struggled to break it. In order for the next leg up to commence, Bitcoin will first need to reclaim $30K. In our previous market update, we noted the convergence of MA9 and MA50, signalling a potential crossover. Last Tuesday, that crossing finally occurred. When a fast moving average (MA9) crosses below a slower moving average (MA50), markets perceive it as a bearish signal. Another important indicator to take a look at is the MACD. Last week, it remained relatively neutral. Although the MACD line has been below its signal line, the spread between them has been quite small, represented by the short bars on the histogram. However, recently the two lines have begun to diverge. This is another bearish signal. The last time this happened, Bitcoin lost $30K and fell towards $27K. Although technical indicators aren’t always accurate at predicting market direction, most indicators are pointing towards an increase in bearish momentum across the crypto market in the coming days. Finally, over recent weeks, the market has seen a variety of meme coins rally upwards. During phases of cycles, ‘meme coin season’ has often served as an indicator of a local top. Back in 2021, shortly after Doge reached its all-time high, Bitcoin capitulated from $60,000 to around $30,000. With this 'silly season' firmly upon us, current market sentiment feels rather frothy.
by Coinrule
1
$SPY amidst the Debt Ceiling Standoff Join Stock Justice as we navigate the thrilling rollercoaster of the SPDR S&P 500 ETF Trust (SPY) and the high-stakes poker game of the debt ceiling standoff. From SPY's triumphant rise from its October 2022 lows to the jitterbug dance of the market's recent chop, we'll delve into the complexities of these market dynamics. We'll also tackle the potential implications of the debt ceiling standoff, a ticking time bomb that could shake investor confidence and trigger market volatility. It's a wild ride, but with a keen eye and a steady hand, we'll navigate these choppy market waters together. Tune in for insights, analysis, and a dash of light-hearted banter. TL;DR -- no directional bias amidst the chop.
CME_MINI:ES1!
by StockJustice
Navigating The American Debt Ceiling DramaSome people create their own storms. And then get upset when it starts to rain. US Debt Ceiling drama is akin to a soap opera that never ends. Debt ceiling issue is not new. Why bother now? Political polarisation in the US has got to unprecedented levels. The showmanship could tip over into a political nightmare. It could send economic shockwaves with impact deeply felt both within US and well beyond its shores. Many politicians seemingly are so pulled away from reality that their fantasies aren’t working. Wishing away a problem out of its existence is not a solution. The Debt Ceiling is here. US defaulting on its debt is highly unlikely. Scarily though, the probability of that occurrence is non-zero. This paper looks at recent financial history surrounding prior debt ceiling episodes. Crucially, it delves into investor behaviour and their corresponding investment decisions across various asset classes. When uncertainty looms large, straddles and spreads arguably deliver optimal hedging and investment outcomes. A SHORT HISTORY OF DEBT CEILING. WHAT IS IT? HAS IT BEEN BREACHED BEFORE? The US debt ceiling is a maximum cap set by the Congress on the debt level that can be issued by the US Treasury to fund US Government spending. The ceiling was first introduced in 1917 to give US Treasury more flexibility to borrow money to fund first world war. When the US government spends more money than it brings in through taxes and revenues, the US Treasury issues bonds to make up the deficit. The net treasury bond issuance is the US national debt. Last year, the US Government spent USD 6.27 trillion while only collecting USD 4.9 trillion in revenue. This resulted in a deficit of “only” USD 1.38 trillion which had to be financed through US treasury bond issuance. This deficit was not an exception. In fact, that’s the norm. The US Government can afford to and has been a profligate borrower. It has run a deficit each year since 2001. In fact, it has had budget surplus ONLY five (5) times in the last fifty (50) years. If that wasn’t enough, the deficit ballooned drastically from under USD 1 trillion in 2019 to more than USD 3.1 trillion in 2020 and USD 2.7 trillion in 2021 thanks to massive pandemic stimulus programs and tax deferrals. This pushed the total US national debt to a staggering USD 31.46 trillion, higher than the debt ceiling of USD 31.4 trillion. The limit was breached! So, what happened when the ceiling was broken? Not that much actually. When the ceiling is broken into, the US Congress must pass legislation to raise or suspend the ceiling. Congress has raised the ceiling not once but 78 times since 1970. The decision is usually cross-partisan as the ceiling has been raised under both Republicans and Democrats. It was last raised in 2021 by USD 2.5 trillion to its current level. Where consensus over raising the ceiling cannot be reached, Congress can also choose to suspend the ceiling as a temporary measure. This was last done from 2019 to 2021. Since January, the Treasury has had to rely on the Treasury General Account and extraordinary measures to keep the country functioning. Cash balance at the Treasury remains precariously low. Its operating balance stood close to nearly USD 1 trillion last April but now hovers around USD 200 billion. Such reckless borrowing! Yet US continues to remain profligate. How? Global investors have confidence in the US Government's ability to service its debt. Despite the increasing debt, the US Government continues to pay investors interest on its bonds without a miss. Strong economic growth and its role as a global economic powerhouse assuages investor concerns over a potential default. Additionally, where Treasury does not have adequate operating cash flow, it leans on a credit line from the Federal Reserve (“Fed”). The dollar’s strength and reserve status contribute to the US Government’s creditworthiness and vice-versa. The Fed is also the largest holder of US government debt. It holds USD 6.1 trillion as of September 2022 (20% of the overall debt). The share of government debt held by the Fed surged to current levels from just above 10% during the pandemic due to massive purchases of treasury bills by the Fed as an emergency stimulus measure. GROWING US DEBT IS BECOMING A SOURCE OF CONCERN US debt has ballooned during the pandemic. It is deeply concerning for multiple reasons. Key among them is the risk of default. Although debt has increased significantly, GDP growth during this period has been tepid due to pandemic restrictions stifling economic activity. As such the ratio of national debt to GDP, a measure of the US’s ability to pay back its loan has also skyrocketed. This increases the risk that the US Government may fail to service its debt. A US Government default would lead to surging yields on treasury bonds and crashing stock prices. It would also call into question its creditworthiness limiting future borrowing potential. A default will also have far-reaching economic consequences threatening dollar hegemony which is already being challenged on multiple fronts. Another concern is the rising cost of servicing the debt. Servicing the debt is the single largest government expense. Interest payments on debt this year are expected to reach USD 357.1 billion or 6.8% of all government expenditure. Additionally, with the Fed having raised interest rates with no stated intention of pivoting in 2023, the interest rate on US public debt, which is currently at historical lows, will also rise. DEBT CEILING BREACH AGAIN. SO WHAT? LOOKING BACK IN TIME FOR ANSWERS. There has been more than one occasion when political disagreements resulted in Congress delaying the raising of the debt limit. In 2011, political disagreements pushed the government to the brink of default. The ceiling was raised just two (2) days before the estimated default deadline (the “X-date”). Despite the raise, S&P lowered its credit rating for the United States from AAA to AA+ reflecting the effects that political disagreements were having on the country’s creditworthiness. This played out again in 2013 due to same political disagreements. Thankfully, for investors, the effects of the 2013 crisis on financial markets were not as severe. Flash back. Equity markets initially dropped after the debt ceiling was reached and investors worried that the disagreements would not be resolved in time. In July 2011, markets started to recover as both parties started to work on deficit reduction proposals. Then on July 25th, just eight (8) days before the borrowing authority of the US would be exhausted, Credit Default Swaps on US debt spiked and the CDS curve inverted as participants feared that a deal would not be reached in time. This led equities sharply lower. On August 2nd, a bill raising the ceiling was rushed through both the House and the Senate. Following this S&P lowered US credit rating from AAA to AA+ citing uncontrolled debt growth. Equity prices continued to drop even after the passage of the bill. Commodities showed similar price behaviour heading into the passage of the bill. However, unlike stocks, gold and silver prices rallied after August 2nd. The USD weakened against other currencies before the passing of the bill but recovered after August 2nd. Treasury yields trended lower but spiked during key events during this period. Short-term treasury yields remained highly volatile. Following crisis resolution, yields plunged sharply. US DEBT CEILING CRISIS AGAIN. WHAT NOW IN 2023? The US reached its debt ceiling again in January 2023 and yet another debt crisis. 2013 is repeating itself again as lawmakers disagree over whether to raise the ceiling further or bring the budget under control. The Congressional Budget Office (CBO), a non-partisan organization, has estimated that the US could be at a risk of default as early as June 1st. Republicans disagree with the Biden administration. They seek budget cuts to reduce annual deficits while Democrats want the ceiling to be raised without any conditions tied to it. This crisis is exacerbated by rising political polarisation in the US. Not just metamorphically, the Republicans and Democrats are at each other’s throat. A study by the Carnegie Endowment for International Peace found that no established democracy in the recent past has been as polarised as the US is today. This raises the risk that Congress gets into a stalemate. Moreover, the house is only in session for 12 days in May. After the law is passed in Congress it must also pass through the Senate and the President. The availability of all three overlap on just seven (7) days, the last of which is the 17th of May. This means that lawmakers have just 3 days (from May 12th) to reconcile their differences before the US is put at risk of default. POSITIONING INVESTMENT PORTFOLIOS IN DEBT CRISIS WITH X-DATE IN SIGHT What’s X-date? It refers to the date on which the US Government would have exhausted all its options except debt default. The X-date could arrive as early as June 1st. There is a small chance that it could arrive in late July or early August. The US Government collects tax receipts in mid-June. If the US Treasury can stretch until then it will have enough cash to last another six weeks before knocking against the debt ceiling again. The current crisis has been brewing. Equity markets remain sanguine. But near-term treasury yields have started panicking. Short term yields have spiked. The difference in yield on Treasury Bills that mature before the likely X-date (23/May) & after it (13/June) has shot up. Muted equity markets create compelling opportunity for short sellers. In the same vein, it also presents buying opportunities when debt ceiling is eventually lifted. When up or down is near impossible to predict, an astutely crafted straddle or time spread can save the day. 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.
Editors' picks
TVC:US01MY
by mintdotfinance
27
The US debt ceiling - A path to inevitable market volatilityThe US debt ceiling should be firmly on the radar and getting an understanding of the risks it poses could help us better recognise the trades which could serve us well. It is incredibly painful for all market participants, but it can radically alter our trading environment and reverse the low volatility regime, we have found ourselves in recently. Like most of the traders I speak to we know the debt limit will be lifted; it must be – the question is when we get the volatility, and what will be the duration and to what extent. Understand the ‘X-date’ The issues at hand are incredibly complex – most public policy experts and economists when they work together struggle to have any conviction on forging an exact date around when the US Treasury’s funds will be so depleted that they must prioritise essential outgoing payments – these include social security, Medicare, Medicaid, veteran payments, and its debt obligations. This ‘X-date’ is critical in our ability to time debt ceiling trades (and hedges) and as it stands both Treasury Secretary Janet Yellen and the non-partisan CBO have said it's early June. The sell-off in US Treasury bills maturing over this date suggests the market puts faith in this call. What the market is looking at closely is the Treasury’s daily cash balances, which can be found here - fsapps.fiscal.treasury.gov . As it stands, the US Treasury (UST) Department has $215b in the kitty, but this will be drawn down as we head to June and perhaps even below $50b. This would be worryingly low, especially as in the first two weeks of June we understand that the UST must make a $80-100b payment for social security and Medicare. You’ll hear a lot about ‘prioritisation’ in the coming weeks and this is where the UST must make choices on which payments to make – it is highly political. There will be a huge hit to confidence if 58m Americans don’t get their social security and both the Democrats and Republicans will be keen to avoid that at all costs. Can Treasury make it to 15 June? If the UST can make it to 15 June, then they will receive a boost from corporate tax inflows and then a chunky maturity from a maturing investment fund in late June. I guess if we still haven’t seen an agreement by then, they then draw down on these funds and we start to consider what payments may be missed and the impact on economics through July. The big issue, in a word – ‘growth’. Either certain payments are missed and that significantly impacts consumer and business confidence, at a time when US economics is already fragile and the US is headed towards recession. Or we see an agreement, that despite the Democrat's strong disdain for spending cuts, includes measures which could be a drag on growth. What happens in a technical default? The idea that we may see the UST miss a payment on its bond obligations is the elephant in the room. The UST will look to defend this above all else – Biden has even stated he will use the 14th Amendment and strong arm a lift in the debt ceiling – an extreme measure and one that will see conservative Republicans taking legal action. He made talk of it in the prior session, so we know it's on the table. If it even looks like a technical default, or best coined as a deferred payment, is on the cards – then markets will light up – I’d say the markets are pricing this possibility at around 4-5% at this stage. UST bills are already showing stress and Treasury auctions of late have been poor – no none is buying T-bills that mature in June and why would they? If you hold this paper and the UST can't pay on maturity you need that cash – US bills are the highest form of collateral and the knock-on effects through markets would be huge. Fitch has already said they will downgrade the US credit rating and as we saw in 2011 most of the risk aversion came after S&P downgraded the US rating to AA+. Making matters worse is the fact there is that the path to negotiate is so tight – with the recess calendar for the Senate, House and Biden’s own schedule, there are JUST 7 days to get this down. Knowing the REP’s have a 4-seat advantage in the House gives them very little room to and if a bill is put to the floor, it will fail if 4 of the 222 REP votes against it – it will be shot down straight away. A rabbit needs to be pulled out of the hat. I see 5 actions playing out: 1. Congress agrees on a short-term extension to raise the debt limit to Sept or Oct. 2. We see an agreement to raise the debt ceiling on the X date, potentially extending for 2 to 3 years. 3. We hit the X date with no agreement and depending on cash on hand, Treasury may have to prioritise payments until 15 June, potentially impacting economics. 4. Treasury muddle through to July before cash levels deplete and must prioritise payments in July. 5. If the US looks destined to miss a bond payment the President uses the 14th Amendment to solve the Debt Ceiling. I am seeing some signs of hedging activity in S&P500 options, with S&P 1-month put/call implied vol ‘skew’ on the rise. Some have focused on a spike in US credit default swaps (CDS), and we’ve seen UST bills blowing up, but our core markets are yet to react – it’s still too early to buy JPY, CHF or gold just yet. In 2011 – which is our best-case study – the JPY, CHF and gold were the best hedges, with traders piling into short US bank exposures. I see those working well this time around too, but with the Fed having 5.25% to play around with on the fed funds rate and QT still in play, if we start to head past the ‘X date’ without signs of reconciliation and the USD will be taken down. Like everyone else we know the debt ceiling will be raised – it must be – but it doesn’t mean we can’t have a solid bit of volatility in between.
PEPPERSTONE:USDXShort
by Pepperstone
$aapl : Important levels to watch as we go into the house voteIn this video, we will be taking a closer look at Apple Inc. ( NASDAQ:AAPL ) and the important levels to keep an eye on as we head into the upcoming house vote. With the current state of the market and the potential impact of this vote on Apple's stock price, it's essential to understand the key levels of support and resistance to watch for. Join us as we analyze the technicals and provide insights into what could be in store for NASDAQ:AAPL in the coming days.
NASDAQ:AAPL
by Entrenched
1
5 Things to Watch in the Next 2 WeeksCME: E-Mini S&P 500 Put Options ( CME_MINI:ES1! ) Important data releases in the coming weeks would shed light on the health of the US economy and could have significant impacts on global financial markets. We will focus on a number of critical datasets, mainly the following, in the upcoming weeks: • Federal tax revenue (Tax filing deadline: April 18) • Existing home sales (April 20) • Personal income and outlay (April 28) • Fed rate hike, or the lack of it (May 3) • Gasoline price trend (before peak summer driving season) Federal Tax Revenue According to the US Treasury Department, the sources of tax revenue for US federal government in 2021 were: • Individual taxes: 42.1% • Social insurance taxes: 23.8% • Consumption taxes: 16.6% • Property taxes: 11.4% • Corporate taxes: 6.0% The annual tax filing deadline for individual and corporation is April 18th. In practice, income tax, social security and Medicare are withheld from each paycheck for employees. Corporations pay estimated tax on a monthly basis. Property taxes are assessed annually. Sales tax is paid whenever you buy products or services. Tax filing is a process where taxpayers calculate tax liability and claim tax credit. If you’ve paid too much, ask for a refund. If you didn’t pay enough, send Uncle Sam a check. We could track government tax revenue and expenditure using the Monthly Treasury Statement (MTS) data published by the Treasury Department. Here are what I found: • In the first three months of 2023, gross tax revenue is $2.268 trillion, while tax refund amounts to $219.8 billion; The resulting net tax receipts are $2.048 trillion; • Comparing to Q1 2022, gross tax revenue is down 0.2%, but tax refunds are up big time by 45.8%. Net tax receipts are down 3.5% year-over-year; • Q1 individual income taxes $1.22 trillion, tax refunds $192.4 billion and net tax receipts $1.03 trillion; Y/Y changes are -1.9%, +59% and -8.5%, respectively; • Q1 corporate income taxes (in billions) $159.0, refunds $19.0, and net tax receipts $140.0; Y/Y changes are +5.1%, -20.7% and +10.0%, respectively; Individual taxes are the most important revenue source for the United States. A declining tax receipt would push the federal budget deeper in the red. But with unemployment at record low and wages on the rise, why is income tax revenue going down? In 2020, the top 1% of income earners earned 22% of all income and paid 42% of all federal income taxes – more than the bottom 90% combined (37%). For the top earners, most of their income taxes come from capital gain, not from wages. In 2021, Dow Jones Industrial Average gained 18.7% while the S&P 500 and Nasdaq 100 had annual returns of approximately 27%. I examine the MTS data for April 2022, which covered the tax filing period for year 2021. Net income tax receipt was $1.72 trillion, up 68.5% y/y. This shows positive correlation between stock market gains and growth in individual income tax revenue. In 2022, the Dow declined 8.8%, while S&P and Nasdaq were down 19.4% and 33.0%, respectively. The individual income tax in Q1 2023 was down 1.9%, but tax refund was up 59%. This again shows positive correlation – stock market losses and decline in income tax revenue. March MTS data strongly indicates that investors are writing off big capital losses from last year. When the tax season is over, I expect to see bigger tax refund and widening net receipt shortfall in the April MTS data vs same period in 2022. Implications: Urgency for Debt Ceiling Negotiation In January, in a letter addressed to House Speaker Kevin McCarthy, Treasury Secretary Janet Yellen warned the US has once again reached its debt limit. The Treasury Department started taking extraordinary measures to keep paying the federal government’s bills, but it would suspend new investments until June 5, 2023. Yellen warned both moves are subject to “considerable uncertainty” if Congress does not pass the bill to increase the debt ceiling. US financials have deteriorated since. According to USDebtClock.org: • US National Debt: $31.69 trillion • US Federal Spending: $6.03 trillion • US Federal Tax Revenue: $4.61 trillion • US Federal Budget Deficit: $1.42 trillion We now expect tax revenue to decline by at least tens of billions of dollars, while spendings on Defense, Medicare, Social Security, and Debt Interest are all going up. As a result, federal budget deficit could be underestimated by well over one hundred billion dollars. Would the federal government have enough money to keep the light on until early June? I suspect the insolvency time bomb is ticking closer and closer. Short-term Trading Strategies Although we had two rate hikes and a banking crisis in the first 100 days of 2023, major stock market indexes are all in the positive territory. The Dow gained 2.2%, S&P 500 rebounded 7.8%, and the Nasdaq pushed up 19.6% YTD. While investors managed to brush off bad news so far, balance sheet deterioration in government, corporation and household would eventually catch up. I am seeing a 5-10% correction in the S&P 500, if some of the following conditions materialize: • Federal tax revenue comes in significantly lower than expected. April MTS report would be released around May 12th; • May 3rd FOMC: If the Fed raises rates and does not signal an end of the tightening cycle, both corporate earnings and household spending would suffer; • US banks could tighten lending standards in the wake of banking crisis. This would add to higher borrowing cost on top of the rising interest rates; • Debt ceiling negotiation: if the White House and the Congress could not reach a deal quickly, we may be heading for the technical default of US government debt. Right now, they are not even sitting at the negotiating table. Options on CME E-Mini S&P 500 may be a way to express a bearish view. The E-mini S&P 500 Index Futures June contract (ESM3) is quoted 4171.75 last Friday. With a notional value of HKEX:50 x S&P 500 Index point, each contract is worth $208,587.5. Put option with a 4070 strike, which is about 100 points below market value, is quoted 76.25. To acquire one option requires an upfront premium of HKEX:3 ,812.50 (=76.25 X HKEX:50 ). Put option carries a nonlinear payoff diagram. Your loss is limited to the premium you paid, but potential gain is unlimited. Hypothetically, if the S&P futures price falls to 3900, put option will be 170 points in the money (=4070-3900). The gain on the account would be HKEX:8 ,500 for each contract. If our view proves to be incorrect and the S&P goes up instead, put premium could decline in value, resulting in a loss. The worst-case scenario is that options would expire worthless. Happy Trading. (To be continued) Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups 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
Editors' picks
CME_MINI:ES1!Short
by JimHuangChicago
19
Will The U.S Dollar Collapse ?OANDA:XAUUSD Currencies fall for various reasons and they include: 1. Political or economic disorder 2. Hyperinflation 3. War 4. A labor market decline 5. Recession, among various other reasons. 1.The United States has weathered several political and economic disorders since its formation in 1776. The country was on the brink of collapse during the Great Depression in 1929 but successfully weathered the storm in 1939. Not only did it withstand the Great Depression, but it also fought World War II with valor the same year. The will to overcome all odds is in the blood of Americans come hell or high water. Therefore, the US has more chances to overcome political or economic disorder due to this very spirit. 2 Hyperinflation Inflation in the US is high but has not reached hyperinflation yet. The Federal Reserve managed to bring down rates from 8% to 6.5% and are rowing the boat, despite muddy waters. Hyperinflation taking over the country with daily essentials becoming 50 times more expensive might never be a reality. 3. War The US is technically not at war but funds wars overseas, be it Ukraine, Syria, and Yemen, among other countries. A rogue nation attacking the US since 9/11 is nil, and the country is not at war today. The US is more equipped to handle and thwart terrorist attacks today than it was ever before. 4. Labor Market Decline The job markets remain robust despite several leading tech firms firing thousands of employees since 2020. Businesses are thriving, and jobs for small and big-level employees remain open for hire. Though the job markets remain on shaky grounds, it managed to sustain and grow, even in muddy conditions. 5. Recession While talks of a recession are growing louder, a recession has technically not hit the markets yet. Both the stock and cryptocurrency markets are doing favorably well in 2023 and generating decent returns for investors. However, a recession cannot be ruled out, as there’s pressure on the financial markets. Considering all the above points, the US stands in a favorable position with the only recession being its weak point. Moreover, since a recession is yet to arrive (or might not arrive), the weak point can be removed for now. In conclusion, the other sore spots can be worked upon and brought under control in the coming years. So Will The US Dollar Collapse? BRICS is yet to finalize a new currency in the upcoming summit in South Africa. The problem with BRICS nations is that decisions are not made swiftly and quickly due to various factors. Asian countries working with each other is not as easy as said. The factors involve India’s broken relations with China and vice-versa. India and China have always been on the wrong ends, and the bitter political disputes could only make things worse. Technically, the US dollar is backed as the default global reserve currency with billions worth of trades being executed each day. The US dollar has a special status globally and is considered one of the safest currencies. The United States is still the biggest economy in the world with an annual GDP of around $23 trillion. Even if the US falters, it always has and will find a way to remain at the top and be an undisputed global leader. The Great Depression is one big example of how nothing is impossible for Americans to succeed in troubled times.
OANDA:XAUUSDEducation
by INVESTRONE
Debt Ceiling and Its Effect on the Market and Bitcoin.The debt ceiling is a legal limit set by the U.S. government on the total amount of national debt that can be outstanding at any given time. When the government reaches this limit, it must either raise the debt ceiling or default on its debt. The debt ceiling is often a contentious issue, with some arguing that it should be raised to allow the government to borrow more money, while others argue that it should be lowered to reduce government spending. The effect of the debt ceiling on the market and the economy can be complex and multifaceted. If the debt ceiling is not raised and the government defaults on its debt, it could lead to a loss of confidence in the U.S. economy and financial markets, which could lead to a decline in stock prices and an increase in interest rates. If the debt ceiling is raised, it may signal that the government is willing to continue borrowing and spending, which could boost economic growth and support stock prices. As for Bitcoin, it is decentralized digital currency, and it's not directly linked to the debt ceiling or the performance of the stock market. However, the sentiment of the market and the economy has an impact on Bitcoin and other cryptocurrencies. During times of uncertainty, investors may see Bitcoin as a hedge against inflation and market volatility, which could boost its price. On the other hand, a stable and growing economy may reduce the appeal of Bitcoin as a safe haven asset, which could result in a decline in its price. The debt ceiling and Bitcoin have had different effects on the economy. The debt ceiling has been used to control the amount of money the government can borrow and has been raised multiple times over the years. Bitcoin, on the other hand, has been a volatile asset, with its price fluctuating drastically over the years. While the debt ceiling has been used to manage government debt, Bitcoin has been used as a speculative asset, with investors and traders using it to make profits. Finally! Historically, it has shown good benefits over the years when the debt ceiling is reached; however, the effect of that is just temporary before something finally crashes, as the charts show. On the other hand, Bitcoin has been a roller coaster ride, with its price rising and falling drastically over the years. While the debt ceiling has been used to control government debt, Bitcoin has been used as an investment asset, with investors and traders speculating on its future price movements.
COINBASE:BTCUSDLong
by mr_rabbit4
Game Theory and the US Debt Crisis ShowdownE-Mini S&P ( CME_MINI:ES1! ), Euro FX ( CME:6E1! ), 10-Year Note ( CBOT:ZN1! ) True or False? • US Government has never defaulted on its debt obligations. • US Treasury bonds have always maintained AAA credit ratings. A history lesson: In June 1812, 30 years after the Revolutionary War, the U.S. declared war against Britain and Spain. In August 1814, British troops burned Washington, D.C. With the Treasury building destroyed, Uncle Sam was unable to service its debts for months. Extraordinary circumstance it may be, this was a default, nonetheless. In 2011, the federal government inched close to its $14.294 trillion debt limit. In April, the Standard & Poor’s responded by changing the outlook of US sovereignty debts from “stable” to “negative”. On August 5, 2011, S&P downgraded US credit ratings from AAA (outstanding) to AA+ (excellent). Moody’s and Fitch retained the triple-A ratings. However, they changed the US outlook to “negative”, in June and November, respectively. Global stock markets declined on Monday, August 8, 2011, following the downgrade announcement. Three major U.S. stock indexes lost between 5% and 7% in one day. What happened next blew our mind. U.S. treasury bonds, the very subject of the downgrade, rose in price! Amid the worsening creditworthiness of the US government, the US dollar gained in value against the Euro and the British Pound. This is a classic example of a general flight to safety. “When America sneezes, the world catches a cold” . Deteriorating financial conditions in the US triggers more severe economic crisis in the rest of the world. At the time, investors were concerned about a European debt crisis, and they pulled money out of Europe and into US dollar and bonds. The US Debt Ceiling Per the definition by the US Department of Treasury, the debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. The debt limit, also called the debt ceiling, does not authorize new spending commitments. It simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past. Failing to increase the debt limit would have catastrophic economic consequences. It would cause the government to default on its legal obligations. That would precipitate another financial crisis and threaten the jobs and savings of everyday Americans. Congress has always acted when called upon to raise the debt limit. Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit. The current U.S. debt limit stands at $31.4 trillion. Current Debt Ceiling Crisis Last Thursday, in a letter addressed to House Speaker Kevin McCarthy, Treasury Secretary Janet Yellen warned the US has once again reached its debt limit. The Treasury Department started taking extraordinary measures to keep paying the federal government’s bills, but it will suspend new investments until June 5, 2023. Yellen warned both moves are subject to “considerable uncertainty” if Congress does not pass a bill to increase the debt ceiling. Highlights of current US government financials, according to USDebtClock.org: • US National Debt: $31.50 trillion • US Federal Spending: $6.00 trillion • US Federal Tax Revenue: $4.61 trillion • US Federal Budget Deficit: $1.40 trillion • 2022 US GDP: $25.93 trillion • Debt to GDP Ratio: 1.21 A comparison to data from my previous report, “The Real Cost of Fed Rate Hikes”, shows big spending just gets bigger in merely six months: • Medicare: $1.52 vs. 1.40 trillion, up $120 billion • Social Security: $1.25 vs. 1.00 trillion, up $250 billion • Defense: $776 vs. 751 billion, up $25 billion • Debt Interest: $523 vs. 440 billion, up $123 billion It’s worth noting that the Fed hiked interest rates and the Treasury got stuck with bigger interest payments. It’s like a boomerang hitting back at the US government. As I have expected, “Debt Interest” could overtake “Defense” as the third largest budget item. This could happen in the new annual budget cycle starting October, as Treasury gradually retires cheap bonds and must borrow at much higher rates. A Public Showdown on the US Debt Ceiling The White House urged Congress to raise the debt ceiling “without condition.” House Republicans, emboldened by their recent majority party control, are preparing for a hard fight. “You couldn’t just keep increasing it,” said House Speaker Kevin McCarthy. He called for cuts to avoid bankrupting programs like Medicare and Social Security. GOP lawmakers want to slash spending as part of an agreement to increase the debt limit. Some have said major spending cuts to key government programs were part of the negotiations that helped McCarthy win the speakership. Excluding the rare 1814 precedent, the U.S. government has not defaulted on its debt. However, the debt ceiling has been raised 22 times from 1997 to 2022. Concessions sought by the new Republican House majority have led to concerns that Congress could have trouble raising the debt ceiling before June. The Looming Default Deadline Secretary Yellen's early June deadline is an educated guess at best. Billions of dollars go in and out of the Treasury coffer daily. While many variables affect the government balance sheet, the biggest unknown is: How much will the government receive by April 15th? I think that the government default is closer than it appears, as Uncle Sam may get a smaller tax revenue this year. Please hear me out. The market capitalization of the entire US stock market is estimated at $40.5 trillion at year-end 2022, down $11.7 trillion or -22.5% from a year ago. An average investor might have lost 20% or more in her stock portfolio last year. A rational investor would sell the losing stocks at the year end to claim tax loss. Let me illustrate this with an example: Sherri put $10,000 each in 10 stocks in January 2022. By December, five of the stocks gained 10% on average, and the other five lost 30%. She decided to keep all the winners and sell all the losers at year end. This allows Sherri to record capital loss of $15,000 (=50,000x30%). Scenario 1 If Sherri made a taxable income of $80,000, without taking into account of capital loss, her tax bill would be $4,807 plus 22% of the amount over $41,775. $4,807 + ($80,000 - $41,775) * 22% = $13,216 Scenario 2 If Sherri claims all the capital loss in one year from her annual taxable income, her new tax bill will be $9,916, a reduction of $3,300. $4,807 + ($80,000 - $15,000 - $41,775) * 22% = $9,916 If more and more investors are doing the same thing, Uncle Sam may find a short fall in personal tax income in the tune of hundreds of billions of dollars. The prospect of corporate income tax revenue is not much rosier. US companies were met by high inflation, high labor cost, high energy bill and higher borrowing cost last year. All would hit the bottom-line, resulting a smaller tax bill. Game Theory: An Analytical Framework This dark picture may actually bring in opportunities for event-driven trading strategies. First, we could use a Game Theory Matrix to analyze the situation. In summary: • Republicans and Democrats each have two options: to fight or to talk ; • If they fight hard and are not willing to compromise, the debt ceiling could not be raised, and the US would default on its debt obligations; • If one party compromises first, it will bring the other party to the negotiation table; • If both parties are engaged in serious talk, they may reach a compromise and an agreement on a new debt limit; • There will be many rounds of negotiations. The talk may not necessarily be successful. It could break down at the end, leading to a default. In my opinion, a US default is no longer unthinkable. The Republicans have good reasons to carry through their threats if they could not get the compromises they seek for. After all, the blame will mainly fall on to the Biden Administration. If a US default is what it takes to bring the country back to fiscal responsibility, so be it. Event-Driven Strategies Taking the 2011 S&P downgrade as a guide, a US default could push T-bonds up and global stock markets down. Euro and Pound could depreciate against the dollar. In retrospect, I found that the rounds of fight and talk offer more trading opportunities. Each move could send shocks and ripples through the financial systems. In Long Strangle options strategy on CBOT Wheat last June, we recognized that the Russia-Ukraine conflict moved the wheat market with battleground actions, not one time but by multiple actions. CBOT 10-Year T-Note (ZN), CME E-Mini S&P 500 (ES) and CME Euro FX (6E) are possible instruments to apply this strategy. When the odds of default and new debt ceiling are both reasonably large, Strangle Options may be applicable. I would consider setting up out-of-the-money calls and OTM puts on the June futures contracts in March. It works the same way on either ZN, ES or 6E. Debt ceiling negotiations will pick up pace after the April 15th tax date. I expect a lot of market-moving breaking news in April and May. When you hold both calls and puts, you may find that regardless of whether the negotiations advance or break down, one of your positions will gain in value. Happy trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. 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
Editors' picks
CME_MINI:ES1!Short
by JimHuangChicago
22
Bitcoin & The Debt Ceiling Effect Welcome ! Feel Free to comment below Like and Follow me for future ideas ! Todays overall BTC is a little bit lower than this morning and roughly same point as last night you can see that btc is going sideways once again but there is always bullish things to talk about when it comes to btc and here is one that is indirectly related which is the Debt Ceiling and you know every time the Debt Ceiling goes up that means a couple of trillions more are going to be printed in the near future but you know and i know this isn't affect BTC indirectly because that as inflation gets worse and worse and worse and trust me it will get worse in 2022 we already seen effects of in 2021 So people are preparing they're putting their money into hard assets lie bitcoin. Mabye this doesnt have a medium pump effect but long term it will definitly help hard assets like bitcoin so this is being voted on and im almos certain its going to pass so be prepared ! -Mike
COINBASE:BTCUSD
by RocketMike111
2
SPY, volatility in the coming month S&P 500 (SPY). Omicron Variant news tanked our market this past Friday. Since this pandemic started SPY has not gone below the Bull Market Support Band which consists of 20 and 21 weeks SMA. Currently, the weekly Bull Market Support band prices are at $446 and $447. Some prices to keep watch are $453, $447, and $446. Consider these as supports during this volatile time. Also note that on December 3, 2021, the Debt Ceiling is due for default. What is the Debt Ceiling? “It is a ceiling imposed by Congress on the amount of debt that the U.S. Federal government can have outstanding.” The U.S has been able to lift the ceiling before however December 3, 2021, is a date to look out for. Plus December 3rd is a Friday so I would consider closing out of positions or keeping a small number of options since the Debt Ceiling news could come out after the market closes. Treasury Secretary Janet Yellen has estimated that the Debt Limit could reach until December 15, 2021. However, December 3rd is still a date to watch. What if the Debt Ceiling defaults? The US dollar could lose value (If the USD loses value then BTC is likely to rally) Gold and Commodities could rise Interest Rates could Rise Equity Market could decline (Stock Market Recession) This would only happen IF the Debt Ceiling defaults, as of now all we can do is wait and trade small positions until a clear direction is decided in the market.
AMEX:SPY
by dbar093