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Bitcoin 10k crash! Reposting from Aug 19, 2023This is a republishing of my original post of title: Bitcoin 10k crash‼️ - 🤔 will it happen? Can it be avoided? The original version was removed - for reason I care not to explain. BITSTAMP:BTCUSD BINANCE:BTCUSDT BINANCE:BTCBUSD KUCOIN:BTCUSDC BINANCE:BTCUSDT.P I wanted to do an update to my original post and below you will see what charts and findings including the original post from August 19th to help you decide on if you want to invest. Please be advised. 🚫Do not allow this to frighten you into selling, or consider this as financial advice, understand the risk and understand this may be hypothetical so bear with me BTC -fans or any of those that follow my content, take this with a grain of salt. Like, laugh, make fun of this prediction, but I just wanted to give everyone a heads up of my findings. So by the 19th to the 20th of this month, we maybe in more trouble than we think, we may need to start the recovery process soon as this is effecting a great deal of the market and not just cryptos if this issue is not recovered soon - or - see Bitcoin fall in price to the range of 10k by September 25, 2023 or late October 2023. I will add updates to this post as it progress. Be sure like, follow, and subscribe for more tips and prediction from me. Grandmaster_oz Will be creating a streaming channel soon so I will be covering future events live or on recording. Below the current status of the market today.
Short
by Grandmaster_Oz
24
Surprised by Fed hinting at another rate hike this year?The big story of the day is of course the Fed signaling one more rate hike this year. At the conclusion of its FOMC meeting a few hours ago, The U.S. Federal Reserve held interest rates unchanged, but projected another rate increase by the end of the year. Additionally, higher for longer is probably the new reality, with projections showing rates falling only half a percentage point in 2024 compared to the full percentage point of cuts anticipated at the meeting in June. Financial markets had widely expected that the Fed would leave rates unchanged, but the revision to its projected cuts has caught markets off-guard. The biggest mover of the day; GBPUSD was doubling impacted by the Fed decision and UK Inflation Rate Slowing Further to 1-1/2-Year Low (to 6.7% in August 2023 from 6.8% in the previous month, falling below the market consensus of 7.0%.) The GBPUSD moved from around 1.238 to a low at 1.233 (but not before some indecision and a shot up to 1.238 within the first hour). In the end, the price fell below the pre-decision (panicked?) low. The current price trades at 1.234 just above that level, but an eye will be kept on this new short-term resistance for the downside prospects of this pair
by BlackBull_Markets
MACRO MONDAY 10~ Interest Rate & S&P500MACRO MONDAY 10 – Historical Interest Rate hike Impact on S&P500 This chart aims to illustrate the relationship between the Federal Reserve’s Interest rate hike policy and the S&P500’s price movements. At a glance the chart highlights the lagging effects of the Federal Reserves Interest Rate hikes on the S&P500 (the “Market”). In all four of the interest rate hikes over the past 24 years the S&P500 did not start to decline until 3 months into an interest the rate pause period (at the earliest) and in 3 out of 4 of the interest rate pauses there was a 6 – 16 month wait before the market begun to turn over. The move to reducing interest rates (after a pause period) has been the major warning signal for the beginning or continuation of a major market decline/capitulation. We might have to wait if we are betting on a major market decline. In the chart we look particularly at the time patterns of the last two major interest rate hike cycles of 2000 and 2007 as they offer us a framework as to what to expect in this current similar hike cycle. Why is this cycle similar to 2000 & 2007?.. because rates increased to 6.5% in 2000, 5.25% in 2007 and we are currently at 5.50% in 2023 (sandwiched between the two). These are the three highest and closely aligned rate cycles over the past 24 years. The COVID-19 crash is included in this analysis but has not been given the same attention as the three larger and similar hike cycles 2000,2007 & 2023. The Chart We can simplify the chart down to FIVE key points (also summarised hereunder): 1. Previously when the Federal Reserve increased interest rates the S&P500 made significant price gains with a 20% increase in 2000 and a 23% increase in 2007. - Since rates started increasing in February 2022 we have seen the S&P500 price make a sharp decline and then recover all those losses to establish an increase of 5% at present since the hiking started. - This means all three major interest hike cycles resulted in positive S&P500 price action. - For reference, a more gradual rate hike pre COVID-19 also resulted in 20%+ positive price action. 2. When the Federal Reserve paused interest rates in 2000 it led to a 15% decline in the S&P500 and then in 2007 it led to a 28% increase in the S&P500. It is worth noting that a lower interest rate was established in 2007 at 5.25% versus 6.5% in 2000. This might indicate that this 1.25% difference may have led to an earlier negative impact to the market in 2000 causing a decline during the pause phase. Higher rate, higher risk of market decline during a pause. - At present we are holding at 5.5% (between the 6.5% of 2000 and the 5.25% of 2007). 3. In the event that the Federal Reserve is pausing rates from hereon in, historic timelines of major hike cycles suggest a 7 month pause like in 2000 or a 16 month pause in line with 2007 (avg. of both c.11 months). For reference COVID-19’s rate pause was for 6 months. - 6 - 7 months from now would be March/April 2024 and 16 months from now would be Nov 2024 (avg. of both Jun 2024 as indicated on chart). 4. As you can see from the red circles in the chart the initiation of Interest rate reductions have been the major and often advanced warning signals for significant market declines, including for COVID-19. 5. It is worth considering that before the COVID-19 crash, the interest rate pause was for 6 months from Dec 2018 – Jun 2019. Thereafter from July 2019 rates begun to reduce (THE WARNING SIGNAL from point 4 above)…conversely the market rallied hard by 20% from $2.8k to $3.4k topping in Feb 2020 at which point a major 35% capitulation cascaded over 6 weeks pushing the S&P500 down to $2,200. Similarly in 2007 the rates began to decline in Aug 2007 in advance of market top in Oct 2007. A 53% decline followed. The lesson here is, no matter how high the market goes, once interest rates are decreasing it’s time to be on the defensive. Summary 1. Interest Rate increases have resulted in positive S&P500 price action 2. Interest rate pauses are the first cautionary signal of potential negative S&P500 price action however 2 out of 3 pauses have resulted in positive price action. The higher the rate the higher the chance of a market decline during the pause period. 3. Interest rate pauses have ranged from 6 to 16 months (avg. of 11 months). 4. Interest rate reductions have been the major, often advanced warning signal for significant and continued market decline (red circles on chart) 5. Interest rates can decrease for 2 to 6 months before the market eventually capitulates. - In 2020 rates decreased for 6 months as the market continued its ascent and in 2007 rates decreased for 2 months as the market continued its ascent. This tells us that rates can go down as prices go up but that it rarely lasts with any gains completely wiped out within months. September – The Doors to Risk Open We now understand, as per point 2 above, that an Interest rate pause is the first cautionary signal of potential negative S&P500 price action. Should the Fed confirm a pause in September 2023 we will clearly be moving into a more dangerous phase of the interest rate cycle. Based on the chart and subject to the Fed pausing interest rates from September 2023 we can now project that there is a 33% chance of immediate market decline (within 3 months) when the pause commences with this risk increasing substantially from the 6th and 7th month of the pause in March/April 2024. I have referenced previously how the current yield curve inversion on the 2/10 year Treasury Spread provided advance warning of recession/capitulation prior to almost all recessions however it provided us a wide 6 - 22 month window of time from the time the yield curve made its first definitive turn back up to the 0% level (See Macro Monday 2 – Recession Timeframe Horizon). Interestingly September 2023 will be the 6th month of that 6 – 22 month window. Both todays chart and Macro Monday 2’s chart emphasize how the month of September 2023 opens the door to increased market risk. Buckle up folks. March/April 2024 – Eye of the Storm On Macro Monday 2 – Recession Timeframe Horizon our average time before a recession after the yield curve starts to turn up was 13 months or April 2024 (average of past 6 recessions using 2/10Y Treasury Spread). From today’s review of the Interest rate hikes impact on the S&P500, we have a strong indication that March/April 2024 will be key high risk date also. Now we have two charts that indicate that the month of Mar/Apr 2024 will come with significantly increased risk. Its worth noting a pause could last 16 months like in 2007 lasting until Nov 2024, at which point we would be pretty frustrated if we had been preparing defensively since Mar/Apr 2024. Just another scenario to keep in mind. The Capitulation Signal Based on today’s chart, should interest rates at any stage decline we should be prepared for significant market decline with immediate effect or within 2 months (at worst). Regardless of any subsequent increases in the market, these would likely be wiped out within 6 – 9 months by a capitulation. An optimist could run a trailing stop and hope it executes in the event of. Bridging the Gaps Please have a look at last week’s Macro Monday 9 – Initial Jobless Claims if you would like to measure risk month to month. The chart is designed so that you can press play and have an idea of the risk level we are entering into on an ongoing basis. In this chart we summarised more intermediate risk levels with Sept-Oct 2023 as Risk level 1 (yield curve inversion time window opens and potential rate pause risk increase) and Nov-Dec 2023 as stepping into a higher Risk Level 2 (as increase in Jobless claims average timeframe will be hit). Should the yield curve continue to move up towards being un-inverted and should Jobless Claims increase then Jan 2024 forward this could be considered a higher Risk level 3 leading the path to our Risk level 4 defined today which is March/April 2024. Final Word It is worth noting that the Fed could surprise us and start increasing rates again, they may also not pause interest rates in Sept 2023. For this reason I included the small black and red arrows that provide a general timeline across different rate periods to help us gauge a market top (red arrows) and a market bottom (black arrows). The black arrows suggest a time window of 27 – 32 months from now being the market bottom. A lot of people are focused on when a recession or capitulation will start, we may want to start thinking a step ahead and prepare for the opportunity that will present itself at a market bottom. Having a time window can help us plan and be psychologically prepared to consider taking a position in a market of pain and fear should the timing window align. If we are expecting this bottom in between Oct 2025 and Mar 2026, we can make more rational decisions when the streets are red. We can try to make more definitive calls and decisions on an ongoing bases so please please do not take any of the above as a guarantee. We know the risk is increasing now and a lot of charts indicate incremental increases in risk up to Mar/Apr 2024, Nov 2024 and even January - March 2025. All of theses dates are possible trigger events but ultimately we don’t know. We are just trying to prepare and read the warning signs on the road as we drive closer to a potential harpin turn. If you have any charts you want me to look at or think would be valuable to review in the context of the above subject matter please let me know, id love to hear about it. PUKA
ECONOMICS:USINTR
by PukaCharts
6
NQ Power Range Report with FIB Ext - 9/20/2023 SessionCME_MINI:NQZ2023 - PR High: 15386.50 - PR Low: 15377.25 - NZ Spread: 20.75 Tight NZ spread ahead of FOMC day 14:00 – FOMC Economic Projections - FOMC Statement - Fed Interest Rate Decision 14:30 – FOMC Press Conference Evening Stats (As of 12:05 AM) - Weekend Gap: N/A - Session Gap: -0.33% (open > 15807) - Session Gap: -0.11% (open > 15939) - Session Open ATR: 224.75 - Volume: 17K - Open Int: 235K - Trend Grade: Neutral - From ATH: -8.5% (Rounded) Key Levels (Rounded - Think of these as ranges) - Long: 16105 - Mid: 15247 - Short: 14675 Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
CME_MINI:NQZ2023Short
by mv3trader5
Triple Witching Signals Market Turning PointCME: E-Mini S&P 500 Futures ( CME_MINI:ES1! ) Last Friday was the infamous “Triple Witching Day”, where US stock index futures, stock index options, and single-stock options contracts all expired on the same trading day. These phenomena happen only four times a year: on the third Friday of March, June, September, and December. In 2023, Triple Witching occurs on March 17th, June 16th, September 15th, and December 15th. In folklore, the witching hour is a supernatural time of day when evil things may happen. Derivatives traders use this term to magnify the significance of options expiration. Hence the “Triple Witching Day”, and “Triple Witching Hour”, the last hour of trading on that day. Understanding Triple Witching A common expiration date for all three types of equities derivatives could cause increased trading volume and unusual price movements in both the derivatives contracts and the underlying equity assets. Most traders seeking derivatives exposure are either hedgers or speculators. Speculators must offset their open positions prior to the end of triple witching hour. Hedgers, on the other hand, may want to maintain the hedging of their stock portfolio. They could close the existing futures or options positions and roll them out to the next contracts. Some traders opened the contracts with the intention of buying the underlying securities. With any deliverable contract, the seller must deliver the underlying securities to the buyer when the futures contract expires, or if the options are exercised. Triple witching days could generate escalated trading activity and volatility. Although much of the trading during triple witching is related to the squaring of positions, the surge in trading also drives price inefficiencies, which draws short-term arbitrageurs. Traders with large short gamma positions are particularly exposed to price movements leading up to expiration. Arbitrageurs try to take advantage of such abnormal price action. Triple Witching Day on Friday September 15th US stocks fell last Friday as investors wrapped up a volatile week ahead of the Federal Reserve’s upcoming rate-setting meeting on September 19th-20th. The Dow Jones Industrial Average slid 288.87 points, or -0.83%, to 34,618.24. At its lows, the index completely eliminated Thursday’s 332-point rally. The S&P 500 was lower by 1.22% to 4,450.32. And the Nasdaq Composite dropped 1.56% to 13,708.33. In equity derivative market, I found that the high-volume day for CME E-Mini S&P 500 options on futures occurred on Thursday September 14th, the day before Triple Witching. The E-Mini S&P options had a daily volume between 100K and 200K contracts from August to Mid-September. On September 14th, trade volume shot up 92% from the prior trading day to 441,871, and open interest gained 157,913 contracts to 2,459,599. Both trade volume and open interest fell back to normal levels on the next day. This is evidence that traders planned their trades ahead of Triple Witching, so that they could avoid being squeezed on the last trading day and hours. Triple Witching and Market Turning Points Upon further review of the S&P price data, I found that Triple Witching Days in the past two years usually signaled a change in market directions. Following each of the seven such days under examination, the S&P moved up four times and moved down three times. • 12/17/2021: Closed at 4,620. By March, it was 455 points lower, or -9.8% (Down) • 03/18/2022: Closed at 4,463. It declined by 788 points or -17.7% by June (Down) • 06/17/2022: Closed at 3,675. By August, it rose to 4,314, up 639 or +17.4% (Up) • 09/16/2022: Closed at 3,873. It fell to 3,587 by October, down 286 or -7.4% (Down) • 12/16/2022: Closed at 3,852. By February, it reached 4,193, up 341 or +8.8% (Up) • 03/17/2023: Closed at 3,917. In the next 3 months, it rose 606 points, +15.5% (Up) • 06/17/2023: Closed at 4,523. It moved up nearly 100 points, or 2.1% by August (Up) A move by 7-18% in a short time span of three months is quite significant, statistically. The difficulty is to predict which way the S&P goes next, on the day of Triple Witching. The S&P 500: From now till the next Triple Witching Day On September 15th, the S&P 500 closed at 4,450. Where will the S&P be by December 15th, the next Triple Witching Day? One hint could be found in the futures market. The December 2023 contract of E-Mini S&P 500 futures (ESU3) was settled at 4,498, down 4.8% from 4,675 reached on July 27th. March 2024 contract (ESH4) was settled at 4,549, down 4.0% from its recent high. Our analysis from the last section shows that from one Triple Witching Day to the next, the S&P is more likely to make a big move than moving sideways. The December futures price (4,498) is just 1.1% above the cash index (4,450). Would there be a misprice? If the market follows similar patterns from the past two years, we could expect the S&P to go up to 4,800 (+8%), or down to 4,100 (-8%) by December. In my opinion, the S&P faces significant headwind, after running up 20% from its October low. Here are the top-3 that come to mind: • US CPI has rebounded, from 3.0% in June, to 3.2% in July, and 3.7% in August. The government narrative of inflation getting under control is starting to unravel. • The rise in energy and shelter cost will spill over to household cost-of-living and business operating cost. On the one hand, it raises the final price of good and service; on the other, it reduces consumer dispensable income available for other purchases. • According to the Fed, consumer credit card debt hit $1 trillion in Q2. Total student loans outstanding reached $1.78 trillion in Q1. High credit card interest rates and the resumption of student loan repayments will squeeze consumer budget. The Fed would face a difficult decision this week as it debates whether to raise interest rate or pause for the time being. In my view, the Fed is not done with its monetary tightening policy. Even if it holds rate unchanged for now, it could still raise it again in November or December meeting. The overheated inflation data just makes the Fed unlikely to call it a victory after 11 rate hikes. The remaining Fed meetings in 2023, September 20th, November 1st, and December 13th, all holding before the December Triple Witch Day. If the Fed turns out to be less accommodating than the market expects, the S&P could go further down. Each E-Mini S&P 500 futures contract is notional on $50 times the index. At Friday closing price of 4,498, one December contract is valued at $224,900. When the index moves 1 point, the futures account would gain or lose $50. Buying or selling one contract requires an initial margin of $11,200. Alternatively, investors could consider the Micro S&P 500 ( FWB:MES ). It is 1/10th of the E-Mini contract and requires a margin of $1,120. When the index moves 1 point, the futures account would gain or lose $5. 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_MINI:ES1!Short
by JimHuangChicago
2
Crypto Celebrating Winter Fest🥶 in the SummerSet your dates for the 13th and 20th of september as these next 10 days will be madness on the Crypto market. As both the U.S. Bureau of Labor Statistics - and the US Federal Reserve will be making a few noticeable impacts on the crypto market that may last for months. We are currently in a possible downtrend heading for all known cryptos including Ethereum - XRP -BTC which will likely see the 23,000 range after the 13th as bears are already short selling on BTC in preparation for the event from the U.S. Bureau of Labor Statistics CPI report. This even affects Altcoins such as Pepe - Doge and most of all Shiba-inu which will likely see 0.00000500 - 0.00000200 by the 15th. Some of you may not know what the U.S. Bureau of Labor Statistics CPI report means and how it will Effects the crypto market. Below I will explain the possible effects it will have along with the further effects that will take place after the federal reserve speech on the 20th of September and how this will likely play in the fall to the 20,000 range for Bitcoin and the 0.00000100 range for coins like shib. Be sure to Like follow and sub for more content like this. BITSTAMP:BTCUSD BINANCE:BTCUSDT BITSTAMP:ETHUSD BINANCE:ETHUSDT COINBASE:SHIBUSD BINANCE:SHIBUSDT BINANCE:DOGEUSD BINANCE:DOGEUSDT
Short
by Grandmaster_Oz
4
Fed's Rate Hike Looms Over US30US30 is likely to remain volatile in the coming weeks, as investors assess the risks to the economy. The latest macroeconomic news is not good for the market, with consumer sentiment falling and inflation remaining high. Fed officials have signaled that they are likely to raise interest rates by 0.75% next week, which could further dampen economic activity. Technical traders should be aware of these risks and use fundamental analysis to make informed trading decisions.
CAPITALCOM:US30Short
by CandlesofKarma
Exploring the Weekly OptionsCME: E-Mini Nasdaq 100 Weekly Options ($Q1D-$Q5D) When I first started trading two decades ago, I was overwhelmed by the amount of data that was available. I had a hard time correlating how data relates to price movement. While observing the stock market, I have one question in particular: why does the market often moves drastically immediately after the release of a major report? Over time, I learnt that these reports provide insight into how the economy works. New data validates our assumptions about the future. Take the United States as an example: • Consumers drive the U.S. economy; • Consumers need jobs to be able to buy things and keep the economy going; • The ebb and flow between the degree of joblessness and full employment drive economic activity up or down; • How easy or difficult for households and businesses to get credit affects consumption, jobs, and investment. The following reports have an outsized impact on global financial markets: • The Nonfarm Payroll Report, released by the Bureau of Labor Statistics (BLS); • The Consumer Price Index, also published by the BLS; • Personal Income and Outlays, by the Bureau of Economic Analysis (BEA); • Gross Domestic Product (GDP), also by the BEA; • Federal Open Market Committee (FOMC) meeting, this is where the Federal Reserve sets the Fed Funds interest rates, ten times a year; • Interest rate actions by other central banks, including European Central Bank, the Bank of England, the Bank of Japan, and the People’s Bank of China. Binary Outcomes: Ideal Setting for Options Trading For these highly anticipated reports, investors usually reach a consensus on the expected impact of the new data prior to its release. Market price tends to price in such investor expectations. The next FOMC meeting is on September 20th. According to CME Group’s FedWatch tool, the futures market currently expects a 94% probability that the Fed would keep the Fed Funds rate unchanged at the 5.25%-5.50% range. The September contract of CME Fed Funds Futures (ZQU3) is last settled at 94.665. This implies a Fed Funds rate of 5.335%, right in the middle of the target range. When new data is released, investors focus less on the actual data, but more on how it compares to the consensus. Because the prevailing price already reflected market expectation, new data serves to either confirm or dispute it. We could use a range of -1 to +1 to categorize these outcomes: • Well Below Expectations, -1; • Meet Expectations, 0; • Well Above Expectations, +1. The sign of the outcome does not necessarily correspond to a positive or negative price movement. It differs by the type of data and the respective financial instrument. We could further simplify the results into binary outcomes: • Within Expectation: 0, where actual data approximates previous expectation; • Beyond Expectation: 1, either below or above expectation by a pre-defined margin. Both human and computer think in binary terms: Light switch On or Off, Price goes Up or Down, Risk turns On or Off. In derivatives market, we could buy a Call Options if we expect the price to go up, and a Put Options if we think the price will decline. Weekly Options for Event-Driven Strategies The FOMC meeting is the most significant event that affects global markets. Market may stay calm if the Fed keeps rate unchanged (within expectation). However, if the Fed raises rate unexpectedly, you could hear investors screaming all around the world! To trade the Fed decision, investors could form different strategies using a wild variety of instruments, such as stock market indexes, Treasury bonds, forex futures, gold, WTI crude oil, and even bitcoin. Today, we focus on the Nasdaq 100 index. Here are some alternatives to consider: • Nasdaq 100 ETF: many asset managers offer them, including Invesco, iShares and ProShares. From a trader’s perspective, ETFs offer no leverage. A $100K exposure requires $100K upfront investment. If the market moves up 1%, you also gain 1%, minus the fees. • Nasdaq 100 Futures: CME Micro Nasdaq 100 ($MNQ) has a notional value of 2 times the index, valuing it at $31025, given the Nasdaq’s last close at 15512.5. Each contract requires initial margin of $1680. The futures contract is embedded with an 18.5-to-1 leverage. • Nasdaq 100 Options: As the nearby September contract expires on the 3rd Friday, or the 15th, ahead of the FOMC meeting date, we could not use it for our strategy. Instead, we could apply it with the December contract ($NQU3). On September 1st, the 15800-strike Call is quoted $541.50, and the 15400-strike Put is quoted $535. • Weekly Options: On September 1st, the 15800-strike Call to expire in one week is quoted $14.25, while the 15400-strike Put to expire in one week is quoted $54.50. Premiums for the standard American-style Options are expensive. They come with quarterly contracts and quarterly expirations. While our target date is September 20th, we have to use the December contract and acquire 3-1/2-month worth of time value. Weekly options, on the other hand, offer more precise trading and risk management with more expirations. Investors pay low premium to get the exposure they need and avoid the unnecessary and costly time value. For E-Mini Nasdaq 100, the weekly options that expire on Wednesday, September 20th will be listed on the prior Thursday, September 14th. If an investor forms an opinion about the FOMC decision, he could implement it with a weekly call or put next week. Nasdaq Weekly Options are deliverable contracts. If an investor owns a call and it expires in the money, he will settle the contract with a long position in E-Mini Nasdaq 100 futures. Likewise, if he owns an in-the-money put, he will get a short futures position. If the market moves in favor of an investor’s expectation, the potential payoff could be significant due to the leverage in weekly options. If the investor is incorrect, he could lose money, up to the amount of the entire premium. However, the low-premium nature in weekly options helps contain such loss at a tolerable level. 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_MINI:NQ1!Education
by JimHuangChicago
3
Cracking the Fed Rate-Setting CodeCME: Micro Russell 2000 ( CME_MINI:M2K1! ) On August 25th, Federal Reserve Chair Jerome Powell delivered his annual policy remark, “Inflation: Progress and the Path Ahead”, at the Jackson Hole Symposium. The message is very clear: It is the Fed's job to bring inflation down to the 2% policy goal. The Fed is prepared to raise rates further if appropriate and intends to hold policy at a restrictive level until inflation is moving sustainably down toward its objective. In my opinion, there is a constraint when the Fed considers its policy choices. If monetary tightening pushes the US economy into a recession, it will likely pause or pivot. The Fed aims to cool the economy, not to put the flame out. The Fed Chair maintains that he iterates his decision at each FOMC meeting based on latest available data. I liken this process to a “For Loop” and an “If Statement” in computer programming. Below is my pseudo code in human readable form: • for (i = 0; i < n; n++), where n is the number of FOMC meetings; • if (inflation goes down to 2%), then execute “End Rate Hikes”; • else if (the US economy tanks), also execute “End Rate Hikes”; • else, execute “Continue with Restrictive Monetary Policy”); In other words, the only two conditions that could trigger the end of rate hikes are: • Rate hikes successfully bring the inflation down to 2%; or • Rate hikes break the US economy. To crack the code of the Fed rate-setting decisions, we need to gain some understanding of the US inflation trajectory and the economic growth potential. Inflation Outlook: Coming Down but Still Too High According to the Bureau of Labor Statistics (BLS), the US Consumer Price Index rose 0.2% in July to 3.2% on an annualized basis. • CPI peaked at 9.1% in June 2022. The declining inflation in the past year is a welcome development and signals that the Fed tightening policy is working; • The key driver of low CPI reading is the double-digit decline in energy cost when compared to the record gasoline price last year. This is misleading and lagging data. Gasoline and diesel prices are both on the way up for months; • The Core CPI, excluding energy and food, is 4.7%. Compared to 5.9% in July 2022, the decline is not fast enough, and it is still too high; • At 7.7%, Shelter leads all categories and has the highest price increases. Higher interest rates pushed up mortgage payments and rents. This could lift overall inflation higher in the coming months. The Fed’s preferred inflation metric is the PCE price index. According to the Bureau of Economic Analysis (BEA), PCE price index for June increased 3.0% on an annualized basis. Excluding food and energy, the core PCE increased 4.1% from one year ago. The BEA is scheduled to release July PCE data this week. The new reading would influence the Fed as it debates whether to pause or continue raising rates in the September 20th FOMC meeting. US Economic Outlook: Very Resilient According to the BEA, US real gross domestic product (GDP) increased at an annual rate of 2.4% in the second quarter of 2023. In the first quarter, real GDP increased 2.0%. • Current‑dollar GDP increased 4.7% at an annual rate, or $305.2 billion, in the second quarter to a level of $26.84 trillion; • After the US central bank aggressively raised interest rates from 0.25% to 5.50% in a year and a half, the US economy shows remarkable strength. According to the BLS, total nonfarm payroll employment rose by 187,000 in July, and US the unemployment rate changed little at 3.5%. Job gains occurred in health care, social assistance, financial activities, and wholesale trade. As long as unemployment remains low, American consumers would continue to buy goods and services, pay their bills, and service their debts. • US mortgage delinquency rate was 1.72% in Q2, the lowest in 17 years (vs. 1.74% in Q3 2006), according to the Federal Reserve Bank of St. Louis; • Auto loan delinquency rates have risen from Q1 2021's 1.43% to 1.69% in Q1 2023, according to a recent Credit Industry Insight Report (CIIR) by TransUnion. • US credit card loan delinquency rate was 2.77% in Q2, up from 2.43% in Q1 and 1.59% from year-ago quarter; Why are we seeing different trends? I think that most homeowners locked into low 15- or 30-year fixed mortgage rates before the Fed rate hikes. Auto loans have shorter duration, usually between 4 to 7 years. Since last year, car buyers now were hit by both higher prices and higher interest rates. Credit card default is elevated, but still low from a historical perspective. In the 1990s and early 2000s, delinquency rates hovered around 3-5%. It peaked at 6.77% in 2009 after the financial crisis. Credit card companies charge floating interest rates. In January 2022, before the rate hikes, interest rates averaged around 16%. They are now above 24%. My takeaways Overall, my assessment is that US inflation is not likely to go down to 2% by 2024. While consumers are under stress, it’s not enough to push the US economy into a recession. Therefore, I believe that the Fed would keep higher interest rates for a longer period. At each meeting, it would iterate whether to raise or to pause, but not to cut rates. Impacts to US Stock Market Valuation Up to now, investors were obsessed with the unrealistic assumptions of Fed cutting rates three to four times in 2024. The Jackson Hole speech is a wake-up call. Stock market valuation will have to be repriced based on new long-term interest rate assumptions. Higher interest rates raise the cost of capital for all US corporations. Using the Discounted Cash Flow (DCF) stock valuation method, a company’s present value will decline as a higher rate discounts all future cash flows by a greater percentage. The S&P 500 index has gained 14.75% year-to-date. In recent weeks, it has retreated 200 points (-4.4%) from its 52-week high. The prospect of higher long-term interest rates could put further pressure on the Blue-chip US stock market index. The Nasdaq composite index has gained 29.85% year-to-date. It has a drawdown of 850 points (-5.9%) from its 52-week high. Even a blowout quarterly profit from chip giant Nvidia failed to lift the leading technology stock index higher last week. Trade Ideas On August 11th, 2022, I published a trade idea, “A Tale of Two Americas”. In assessing the impact of Fed rate hikes, I concluded that smaller companies would be hit harder than their larger counterparts. I explored the idea of shorting the lofty valued Russell 2000. At the time, the Russell was quoted at 1,974 and had a trailing Price/Earnings Ratio of 68.96. Fast-forwarding to August 25th, Russell was settled at 1,853 (-6.1%) and the P/E has collapsed to just 27.61, according to Birinyi Associates and Dow Jones Market Data. Today, I still favor the idea of shorting the CME Micro Russell 2000 ( FWB:M2K ). Why? A year ago, the US Corporate BBB Effective Yield was 5.04%. It rose 112 basis points to 6.16% last week, according to Fed data. After the Jackson Hole speech, I expect the bond yield to move up with the new assessment of higher long-term interest rate. Therefore, Russell 2000 would face further downward pressure. The March Rusell 2000 contract (M2KH4) was settled at 1,888 last Friday. Each contract is $5 x Index and has a notional value of $9,440 at current market price. CME requires an initial margin of $620. While shorting a futures contract, an investor could consider setting a stop loss. Hypothetically, a stop loss at 1,800 would limit the loss to $440 (= (1888-1800) * 5). 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
CBOT:ZQ1!Long
by JimHuangChicago
5
Weaker China Data and Fed Interest Rate Rumors Trigger Oil PriceIntroduction: In recent weeks, the global oil market has experienced significant turbulence, with oil prices plummeting due to weaker-than-expected economic data from China and mounting rumors surrounding the Federal Reserve's interest rate decisions. As traders, it is crucial to exercise caution and carefully evaluate the potential risks associated with oil investing in light of these developments. 1. Weaker China Data 2. Fed Interest Rate Rumors Call-to-Action: Pause Oil Investing and Assess Risks Given the current market conditions and the uncertainties surrounding both China's economic performance and the Federal Reserve's interest rate decisions, it is prudent for traders to exercise caution when considering oil investments. Here are a few steps to help you navigate this challenging environment: 1. Evaluate Your Risk Tolerance: Assess your risk appetite and consider the potential impact of further oil price drops on your investment portfolio. Diversify your holdings to mitigate potential losses and explore alternative investment opportunities that may be less susceptible to oil market volatility. 2. Stay Informed: Stay abreast of the latest developments in the Chinese economy and the Federal Reserve's interest rate policies. Monitor vital economic indicators, such as China's GDP growth, industrial production, retail sales figures, and any official statements or actions from the Federal Reserve. 3. Seek Professional Advice: Consult with financial advisors or industry experts who can provide personalized guidance tailored to your investment goals and risk tolerance. Their insights and expertise can help you make informed decisions in this uncertain market environment. Conclusion: The oil market is facing considerable volatility in light of weaker China data and the ongoing speculation surrounding the Federal Reserve's interest rate decisions. As traders, it is crucial to exercise caution and carefully assess the potential risks associated with oil investing. By pausing and reevaluating your investment strategy, diversifying your portfolio, staying informed, and seeking professional advice, you can navigate this challenging environment more effectively and safeguard your investments.
TVC:USOIL
by bryandowningqln
Is the Market Deluding Itself with a Soft Landing Fantasy?As markets surge against expectations, many are starting to believe that the impossible might unfold. The unusually low fund allocation to equities reflects a market sentiment plagued by fear, yet mega caps are continuing to rise against expectations, making some investors feel left behind. With GDP figures beating expectations and headline inflation plummeting, markets are now starting to believe the soft landing narrative. Can the Federal Reserve, after decades of economic engineering, finally dodge a recession? The bond market remains skeptical. When the yield curve inverted, everyone thought a recession was imminent. However, many overlook the lag between the onset of the inversion and an actual recession. Depending on historical context, a recession can either hit while the yield curve remains inverted or much later, once it has normalised. Thus, relying solely on the yield curve as a recession indicator can be misleading. Nevertheless, history has consistently shown that a recession follows the inversion at some point. However, the human psyche is notoriously impatient. If a predicted event doesn't manifest promptly, the market tends to discount its possibility. Remember, most people buy at tops and sell at bottoms. So, the real question isn't whether a recession will happen, but rather when. Why and When Could a Recession Happen? The Federal Reserve holds significant influence over this timeline. As long as interest rates hover around 5.5%, the recession clock ticks faster. With headline inflation plummeting (orange line) and inflation expectations paralleling this descent (blue line), we must understand what caused inflation initially to gauge where it's headed. The inflationary surge was mostly driven by the excessive expansion of the money supply. Examining the first derivative of the US money supply (M2) shows a rapid expansion followed by a subsequent decline. Comparing the growth rate of the money supply (yellow line) with the CPI year-over-year (orange line) reveals a 16-month lag. If this lag remains consistent, there's significant potential downside to inflation. Yet, the Fed continues to hike rates, despite projections of disinflation and deflation. This is because the Fed's job isn't to predict the future, but to respond to current data. Indicators showing a robust labor market and elevated Core PCE caution against prematurely reducing rates. It would be wise for the Fed to await signs of weakening in these indicators before contemplating rate cuts. This could potentially take a while to materialise, especially since unemployment doesn't seem poised to weaken in the immediate future. Unlike previous business cycles, the current situation stands out due to the Job Openings and Labor Turnover Survey (JOLTS) data. There remains a significant number of job openings for every unemployed individual. This bolsters the resilience of the labor market, making rate cuts less probable. Furthermore, the Core Personal Consumption Expenditure (PCE) - a lagging indicator - remains historically high and resilient. Powell has emphasised the Fed's intent to avoid repeating the same mistakes made in the '70s, suggesting we should expect higher rates for longer in order to permanently get Core PCE to 2%. He's also highlighted the relative ease of stimulating the economy out of a recession compared to raising rates, implying it might be more straightforward for the Fed to rein in Core PCE by inducing a recession. Similarly, the government can't afford the risk of the Fed raising rates later on. Considering the government's dependency on low-cost borrowing to manage interest payments on existing debts, higher future rates could pose a big challenge. Fortunately, the Fed uses the Reverse Repo (blue line) as a strategic tool to bypass any potential liquidity crisis until they are able to finance the government's balance sheet (orange line) with cheap debt once again. Given that interest expenses are nearing 1 trillion USD, the Fed will inevitably have to cut rates to zero and initiate Quantitative Easing (QE) in the future. Remember, the sole limitation to Keynesian economics is inflation. Hence, it's logical for the Fed to avoid risking a resurgence of inflation. In essence, a recession might be essential for the Fed's future assistance to the government. Deciphering the Stock Market's Puzzle Despite Powell's frequent emphasis on a 'higher for longer' stance, the market remains skeptical. This is alarming, especially as the full implications of a 5.5% rate haven't been fully experienced by the economy. Once they manifest, job openings will plummet, unemployment figures will surge, and the 'soft landing' illusion might crumble. Historically, such scenarios are common when real rates reach unsustainable levels. Fortunately for investors, there seems to be room for the AI bubble to continue. Markets typically peak about a month before a sustained increase in unemployment. Hence, forward-looking unemployment indicators like job openings, initial claims (blue line), and continued claims (orange line) are crucial for those wishing to divest before a potential market downturn. In the current scenario, it might be wise for investors to stay away from higher-risk assets like small caps and cryptocurrencies. Historically, these haven't performed as well as mega caps during liquidity crunches. Investors might want to reconsider taking on additional risks unless there's a sustained surge in global liquidity (yellow line). Conclusion: A Time for Caution and Opportunity In conclusion, even though a recession seems inevitable, mega caps may continue their upward trend until the labor market reveals signs of distress. Therefore, it's crucial for investors to closely watch leading unemployment indicators and central bank balance sheets to ensure they're well-positioned for both the upcoming market downturn and the subsequent recovery. Disclaimer: This article is intended for informational purposes only. It is not intended to be investment advice. Every investment and trading move involves risk, and you should conduct your own research when making a decision. Past performance is not indicative of future results.
NASDAQ:NDX
by ingeforberg
The Overnight Reverse Repo Facility Looks to be Bottoming OutMoney that has been parked at the Fed's Reverse Repo Facility due to the attractively high interest rates the Fed has set for money parked there has been on a steady decline since late 2022, and recently, this year we confirmed a breakdown of a Bearish Dragon, which led to a BAMM move down to complete a Harmonic M-shape. This then represented an influx of liquidity exiting the facility and effectively hitting circulation, which led to that money chasing assets and commodities. This chasing of assets and commdoities effecctively backed the 2023 Stock Market Rally. The target I had set for this move was down to the 0.886 of a Bullish Bat and now months later we can see that we came very close to it, but it would seem that rather than getting a full 0.886 retrace we are instead getting a confirmation-styled RSI reaction as price Bounces from the 1.618 Extension, which just so happens to align with an AB=CD formation it's made on the way down. I see this as an indication that the liquidity will soon stop flowing out from the facility and that liquidity will now begin to flow back to the facility, effectively taking money out of circulation, which would likely result in a decline in asset prices and a decline in the trading of Short Term Debt on the open market, which could then lead to Short Term Yields rising overall along with the US Dollar as institutions once again begin to lock up their dollars in this facility and chase yield rather than assets. Recently, I have been seeing a lot of weakness in the banking sector. That weakness may act as a catalyst for these institutions to once again park their money with the Fed, just as it did before. As always, my target for an ABCD is back to the Level of C, so we should see this rising back up about 30% before we can start looking for signs of this topping out again.
FRED:RRPONTSYDLong
by RizeSenpai
2
TMF Bull Treasuries Triple Leveraged LONGTMF as shown on a 15 minute chart shows TMF in consolidation at the beginning of the weeks followed by a downtrend when the fed news of the rate hike came out. Today the general market dropped after some federal financial data came out and a treasury auction was a dud with little buyers confounded by Bank of Japan actions inconsistent with the path of the US Fed. The mass index indicator has signaled a reversal as the signal rose above the reversal zone and then dropped below the zone thus triggering. The Relative Trend Index documents the end of the downtrend with the signal line nearly returning above zero. Overall, I think this leveraged ETF overreacted to the federal news and the catalyst from Japan. I believe this to be an good point to enter long using the pivot low as the stop loss. Targets are 7.20 just below the mean anchored VWAP and 7.45 just below the lower boundary of the high volume area of the intermediate term volume profile. This offers modest potential profile for a relatively low risk.
AMEX:TMFLong
by AwesomeAvani
GOLD TO TEST SUPPLY AT $1980Gold price is higher above $1970 during early New York trading session ahead of the Fed. Fed Powell’s speech will be crucial for gold buyers as 0.25% rate hike priced in. XAUUSD tested 1950 support and bounced yesterday which opened the path to $1970. However, a supply zone from May, around $1983 - 1987, appears a tough nut to crack for the XAUUSD bulls. We will be looking for Fed Powell press conference later today for trading opportunities.
OANDA:XAUUSDLong
by GOLDPIPSMAKER
BluetonaFX - DXY US Dollar Fragile After FOMCHi Traders! The US dollar is showing signs of fragility after the expected 25 basis point interest rate hike from the Federal Reserve and the FOMC press conference today due to the ongoing high inflation issues in the US economy. This was reflected in the price action on the DXY 1D chart. The market hit the 50% Fibonacci retracement level at 101.590 to continue the bearish impulsive wave, and the US dollar index might continue down and go back under the 100 level to target the support level at 99.578. There is further data out of the US tomorrow, and if we get further bad news from the US tomorrow, we might possibly get the break below 100. Please do not forget to like, comment, and follow, as your support greatly helps. We appreciate your support. BluetonaFX
TVC:DXY
by BluetonaFX