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TBT is a buy rate cuts likely are stalled LONGTBT is an inverse 20 year Treasury Bill ETF. At present, the Iran Israeli conflict threatens a regional conflict to include the Red Sea and the Easter Mediterranean where oil tankers must navigate to move oil from producer to consumer. Oil price escalation could go hand and hand with geopolitical escalations. Oil and its derivatives are a primary driver of inflation in the US. Inflation has been sticky and forcing the fed's ambitions to cut rate to be paused. The Middle East escalation may make matters worse overall. Federal spending ( aid to Israel for instance) is also a driver of inflation. The budget fight in DC is front and center. I see this as good cause, to continue to take adds to my TBT position whenever I can find a dip worth the discount as a further hedge against a correction in the equities markets which could come on the horizon. Granted a dip of 2-3% from the ATHs is not much but when it hits 10% or more and the VIX/UXXY continue to rise, there will be impetus in a hurry to hedge positions or close them with more urgency. For for TBT, I believe that more is better.
AMEX:TBTLong
by AwesomeAvani
Recession After Fed Rate Cut?Are we heading toward recession? To answer this question, I'm pulling the recession prediction indicator based on GDP provided by FED (ticker:JHGDPBRINKDX) which is the purple color on the bottom chart. It shows that we are on fairly low probability of recession (around 4%) as of end of Aug 2024. The FED indicates it will cut rate on end of Sep 2024. However, if we look back of history of recession based on GDP indicated by FED data (ticker: JHDUSRGDPBR) which is the pink color. It shows that recession only happen right after FED cut rate as show by lime color (ticker:FEDFUNDS). It hard to believe that recession is caused by the FED cutting rate. Or the FED will only cut rate if we are heading toward recession? At least from the past history of rate cut we can see high chance of recession happening after the FED cut rate. And during the recession we can see that S&P500 are falling. So will there be another crash coming after Sep 2024? Please comments below.
SP:SPX
by danny_peanuts
1
Sector Rotation in Anticipation of Rate CutsMarkets have rebounded sharply after last week's fear-driven decline. Despite this, rate cuts are still anticipated in the upcoming FOMC meetings. Changes in monetary policy often benefit some sectors over others, providing investors a chance to adjust their portfolio allocations accordingly. This paper delves into a comparative analysis of sectors around monetary policy pivots to highlight how a spread between S&P Financials Select Sector and S&P Utilities Select Sector stands to benefit in the coming months. It also describes a hypothetical trade setup using CME E-Mini S&P Select Sector futures which can be used to express the view in a margin-efficient manner. RATE CUTS WILL HURT FINANCIAL FIRMS Financial firms benefit significantly from higher rates, as these drive net interest margin (NIM) expansion, boosting their bottom line. However, when rates start to decrease, this positive impact reverses. The Financials Select Sector ETF (XLF) is comprised of 25% banks, 31% financial services firms, and 16.6% insurance firms. All these firms have benefited from higher rates, albeit the strongest impact may be limited to banks and insurance firms whose overall bottom line is significantly impacted by expanding NIM. In the last three monetary policy pivots, XLF has declined by an average of 5.6% over the following six months. Conversely, at the start of rate hikes, the ETF has typically risen by an average of 3.7% in the subsequent six months. While the most recent pivot in 2019 saw an increase in XLF, the overall average trend suggests a decline. The trend is visible even when examining the relative performance of XLF and SPX. Following rate cuts, the spread declined by an average of 2.8% while during rate increases, it declined by just 1.1%. There is another headwind facing the XLF ETF, particularly banks – rising credit delinquencies. Credit card delinquencies are especially concerning as they stood at the highest level in 13 years as of Q1 2024. Overall delinquencies are also rising and near the highest level since 2021. Updated data from the New York Fed has shown that conditions remained stressed in Q2 with total delinquencies at 3.2%. Particularly concerning were severe (>90 days delinquent) credit card delinquencies at a staggering 10.93%. Consumers are increasingly relying on unsustainable credit card debt to cover expenses. As delinquencies remain elevated, issuing banks must increase loan loss provisions which impacts earnings directly. Source: New York Fed As credit card usage becomes unsustainable, another class of companies in XLF – payment processors - will also be hurt. The largest payment processors (Visa, Mastercard, and Amex) represent nearly 15% of the XLF index. RATE CUTS WILL BENEFIT UTILITY FIRMS Unlike financial firms, utility companies have struggled in a high-rate environment. As their huge capital expenditure is often fueled by debt, higher rates result in narrower profits. As rates decline, debt payments decrease, leading to expanded profit margins for utility firms. Historically, the ETF has shown a significant average increase after rate hikes and a smaller increase after rate cuts. This behavior might be due to investors anticipating a weakening economy following rate cuts, which would favor utility firms. However, the index tends to correct later once rates remain elevated for some time. The impact is close to even when comparing the relative performance against the broader S&P 500 with both periods resulting in a ~6% increase in the spread. Utility firms are also likely to outperform in case of a US recession. Although some of the concerning economic data has normalized over the past week, the risk of a recession in the US persists. As utility firms provide essential services, their cash flows are relatively stable even during recessions. While consumers may cut down on discretionary spending, spending on essential services remains unaffected. Mint Finance previously covered these factors in a separate paper. HYPOTHETICAL TRADE SETUP A pivot in Fed Policy is expected in the upcoming FOMC meetings with the CME FedWatch tool signaling 100 basis points of rate cuts in 2024 itself. Rate cuts will impact different sectors differently. While utility firms stand to benefit from lower rates, financial firms may see lower profits. Source: CME FedWatch The spread between CME E-Mini Utilities Select Sector Futures (XAU) and CME E-Mini Financial Select Sector Futures (XAF) has been rising since March as it has favored XAU. The spread responded strongly to a shift in rate cut sentiment as well as the recession signal at the start of the month. The recent correction over the past week offers an improved entry point into the spread. A hypothetical trade setup using XAU futures expiring in September (XAUU2024) and XAF futures expiring in September (XAFU2024) is described below. CME offers margin offset totaling 60% for this spread reducing the capital requirement to USD 3,740. MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme. 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.
CME_MINI:XAU1!Long
by mintdotfinance
Why an emergency rate cut is badThe market has been desperately waiting for a FED rate cut for nearly a year now. We have not received one yet even with the recent flash crash in the market. Despite calls for an emergency rate cut after the crash we didn't get one. Why not? Why is that a good thing? The Fed does not cut rates out of the kindness of their hearts They cut rates only they broke something and they are trying to fix it The lack of emergency rate cut means the recent flash crash was more irrational panic, less based on actual facts The economic data while concerning in areas still is nothing alarming to the point for the Fed to "break glass in case of emergency" rate cut button over When the rate cut does come which is expected still in September, we should hope for 25bps rate cut, nothing more. Small rate cuts a bullish sign that we are still doing ok. Large rate cuts is the equivalent to oxygen masks falling from ceiling, brace for rough landing.
AMEX:SPYLong
by ratchet-mint
3
Differentiate between rate cut and low interest rateNo important economic data from US this week, only trade balance and initial claims to observe on Tue and Thu respectively. US stock market continued decline on Fri, following weakening labor market conditions and earnings from big tech companies last week. In expectations of rate cut, big shots are reducing portfolios. The situation may last until we actually see the first rate cut in the cycle and longer. The rise in stocks is usually associated with low interest rate, I would expect the adjustment in S&P to continue along the path of rate cut. So investors should differentiate between rate cut action and low interest rate, which are presented as two distinguished market conditions.
SP:SPXShort
by moncap2023
SOLANA 1D RANGE There is no denying the last few months in crypto have been frustrating to say the least. With a brutal seemingly endless chop despite some very bullish events such as the halving, BTC & ETH ETFs, institutional interest and buying, presidential candidates in support of the industry etc. Bitcoin still struggles to break and stay above its '21 ATH @ $69,000. For altcoins, and in particular SOL, this means they bleed as well and more often than not, they bleed more than BTC. Since range highs we've seen multiple retests of the lows and no retests of the highs, currently price has lost the range midpoint after hitting diagonal resistance and could potentially be targeting range low once again. The difference this time is the 1D 200EMA which usually serves as a Bullrun launching pad will be above that range low, any acceptance below this moving average is catastrophic for SOL. SOL has recently overtaken ETH in daily DEX volume more than once in the recent past, which has signalled a shift in on-chain preferences for traders of lower-cap coins. This could help to keep SOL afloat compared to other L1'S and alts in general however if the environment truly is risk-off then it may not be enough. From a bulls standpoint you'd like to see SOL hold price in this bullish Orderblock and at the worst $138 which is where daily support & 1D 200EMA is situated. With rate cuts predicted to be coming in September, it feels like a survive the next 6 weeks and thrive in Q4. Until then it's capital preservation market conditions.
by ProR35
IWM/SPX spread - Long smallcapsBeen watching for a reversal of the trend between the 2 indexes and a breakout of this bullish falling wedge for a while. Fundamentally it made sense to look for this breakout result because of the looming interest rate cuts and frothy bond yields since the start of the year. Small caps are highly sensitive to such things. Long IWM or TNA is the play on this breakout. But the best value will be found in heavily beaten down individual small caps. If you want to hedge against a market correction long small caps short large would be the other play.
AMEX:IWMLong
by cc1
1
Front-Running Yield Curve Normalisation on Rate Cut AnticipationThe (in)famous Yield Curve remains inverted. In recent past, spreads normalized only to revert to inversion as rate cut expectations got pushed out. This time though, is different. Recent CPI print has significantly altered market sentiment. The likelihood of an initial rate cut at the September FOMC meeting now exceeds 90%. Consequently, the yield curve is normalizing once more. Current market signals indicate that this normalization could be enduring. WHY IS THE YIELD CURVE INVERTED? The present yield curve inversion indicates that investors do not expect that rates will remain this elevated for long. While 2Y treasuries continue to be re-issued at higher rates, expectations for longer terms such as 10Y and 30Y are lower as they factor in that rates will normalize from their present levels. YIELD CURVE WILL NORMALIZE SOON, WHAT WILL DRIVE IT? While this is the longest period of yield curve inversion in history, the curve has started to normalize. The factors driving normalization in the yield curve were previously discussed. Ordinarily investors demand higher rates for longer-duration treasuries to account for the higher inflation expectations and greater risk. Either inflation must fall, or inflation adjusted treasury yields for longer maturities must rise. Rate cuts will also drive the normalization in the yield curve. The yield spread between 2Y & 10Y treasuries tends to rise in the two months preceding the first rate cut in a cutting cycle as observed in the past. The impact of rate cuts on the 2Y-10Y spread is even more pronounced in the two months following the first-rate cuts. UNCERTAINTY IN MACRO ECONOMIC DATA IS DISSIPATING Make no mistake, the broader picture remains uncertain. However, recent data points to recovery. Chicago PMI showed a sharp recovery in July. But the job market signals uncertainty. Continuing jobless claims remain elevated. Job openings have fallen. But job creation in the last two non-farm payroll prints were above expectations. US Retail sales and industrial production have improved. The impact can be observed through the consistent increase in the GDPNow forecast for Q2 GDP since 12/July. Source: GDPNow The June CPI release showed uncertainty easing. Headline CPI cooled sharply as it fell on a MoM basis. Notably, the stickier core CPI also continued to cool as it fell to 3.3%. However, inflation remaining sticky at the 3% level remains a grave concern. Even if a recession does arrive in the coming months, the 10Y-2Y yield spread is likely to have normalized by then. Yield curve inversion is observed only before recessions not during. RAPID RATE CUTS EXPECTED IN THE COMING YEAR Source: CME FedWatch The rate cuts outlook has improved substantially. FedWatch signals that rates will fall by 100 basis points by March 2025 (as of 19/July) suggesting successive cuts. Other analysts are even more optimistic. Analysts at Citi bank hold the view that rates will be slashed by 200 bps (2% in total), starting in September across eight successive FOMC meetings (25 bps at each) by the summer of 2025. CERTAINTY IN RATE OUTLOOK SUGGESTS YIELD CURVE NORMALIZATION Major moves in the yield curve have only come through after commencement of rate cuts in the past. This time, markets may front-run these expectations. The attempts to front-run rate cuts were already observed in December when the yield spread recovered sharply after the Fed signaled six potential rate cuts in 2024. Presently, the 10Y-2Y yield spread is trading below those levels and has the potential to break out as we approach September rate cuts. The risk of a reversal remains but it is lower. Higher rates pose a systemic risk for the US given its profligate borrowing. Higher rates on treasuries are untenable for much longer. Cost of servicing public debt in June hit USD 140 billion and totaled USD 868 billion in the first nine months of the current fiscal year (33% higher YoY). For reference, the total budget deficit for this period was $1.27 trillion. The interest burden is weighing heavily on the overall budget deficit. HYPOTHETICAL TRADE SETUP Treasury auctions are a sound guide to maturities selection when positioning for yield curve normalization. The recent demand for treasuries at the latest auctions has been low. Bid-to-cover ratio for all (2Y, 5Y, 10Y, and 30Y) was lower than the average bid-to-cover over the prior ten auctions. Demand was weak for the 10Y treasuries. Demand for 30Y treasuries has also been lower than previous auctions but has remained more consistent than 10Y. The yield spread between 30Y-2Y treasuries has outperformed the 10Y-2Y spread over the past 2 months. Investors can seize opportunities from normalization in the 30Y-2Y spread using CME Yield futures. The CME Yield futures are quoted directly in yield with a one basis point change in the yield representing a P&L of USD 10. As yield futures across various maturities represent the same notional, to calculate the spread P&L is equally intuitive with a one basis point change in the spread between two different maturities also equal to USD 10. The hypothetical trade setup consisting of long 30Y and short 2Y is described below. • Entry: -2.6 basis points (bps) • Target: +25 bps • Stop Loss: -25 bps • Profit at Target: USD 276 (27.6 bps x USD 10) • Loss at Stop: USD 224 (22.4 bps x USD 10) • Reward to Risk: 1.24x MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
CBOT_MINI:30Y1!Long
by mintdotfinance
EUR/USD forecast: Currency Pair of the WeekThe EUR/USD poked its head above the June high of 1.0916 to reach its best level since March, after the US Empire State Manufacturing Index came out weaker than expected earlier. The US dollar has remained under pressure against most major currencies, albeit not so much against the likes of the New Zealand dollar following last week’s dovish RBNZ meeting. Still, against the likes of the euro and pound, as well as gold, the greenback has fallen further after last week’s weaker-than-expected US CPI data boosted expectations that the Federal Reserve will loosen its monetary policy at its September meeting. Already cutting rates in June, the European Central Bank will be in focus again this week. This time, no rate cuts are expected from the ECB, which, together with reduced political uncertainty in Europe and weakness in US data, should all help to keep the euro supported against the US dollar, maintaining the short-term EUR/USD forecast in bulls’ favour. EUR/USD forecast: Key macro highlights this week Apart from retail sales and a handful of other macro pointers, the US economic calendar is quite quiet this week. The same could be said about Europe’s data calendar had it not been for the ECB policy decision on Thursday. Here are this week’s key macro highlights, relevant to the EUR/USD pair: - Tuesday - US Retail Sales & Core Retail Sales m/m - Wednesday - US Building Permits US Industrial production m/m - Thursday - Eurozone Main refinancing rate & monetary policy statement US unemployment claims ECB Speech EUR/USD forecast Already, we have seen the Empire State Manufacturing Index print a below-expected -6.6 reading this week, which helped to keep the pressure on the US dollar. But it is all about retail sales on Tuesday, when building permits and industrial production data will be published too. US retail sales expected to fall The health of the US consumer is deteriorating, as was reflected by last month’s release of the May retail sales estimate, which came in at just +0.1% month-over-month. That followed a downwardly revised 0.2% fall in April. Sales at gasoline stations were particularly weak last time, falling 2.2%, while those at furniture stores, an indication of demand for long-lasting goods, slipped 1.1%. Meanwhile, recent data releases have mostly surprised to the downside and inflation has cooled more than expected. If retail sales again disappoint, then the odds of a September rate cut could surge, especially in light of last week’s weaker consumer inflation data (and UoM’s Inflation Expectations survey). ECB rate decision The European Central Bank’s next rate decision is on Thursday, July 18 at 13:15 BST. Don’t expect any fireworks this time, after it delivered its first rate cut in June. That decision was built up so much by the ECB that they simply had to cut even if policymakers were unsure about the path of inflation. Indeed, the minutes of that meeting have since revealed greater uncertainty in ECB staffs’ outlook for inflation, while private consumption showed no convincing evidence of picking up either. The ECB will remain data-dependent, something which Christine Lagarde highlighted at the last press conference in June and said there will be no pre-commitment to a particular rate path. So, don’t expect another rate cut at this meeting, but watch out for clues about the next move. EUR/USD forecast: Technical analysis The EUR/USD has broken above a couple of bearish trend lines that were there from July and December of last year. Rates have also moved and stayed above their 21-day exponential and 200-day simple moving averages. The technical EUR/USD forecast is therefore bullish as things stand. But given that it had struggled around the current levels between 1.0900 to 1.1000 area earlier this year, I wouldn’t be surprised if it hangs around for a few days here, potentially until the ECB rate decision is out of the way. Still, the short-term path of least resistance is clearly to the upside, so I wouldn’t necessarily look for bearish trades here unless the charts tell me otherwise. Key short-term support is now seen between 1.0840-1.0865 area, followed by 1.0800, where the 200-day average now resides.
by WHSelfInvest
XAU/USD : Gold Faces Crucial Support Ahead of Powell's SpeechBy analyzing the gold chart on the 4-hour timeframe, we see that the price is still grappling with the support zone between $2320 and $2323. Today, we are expecting a speech from Mr. Powell in a few hours, which could lead to significant market fluctuations. Markets are looking for signs of whether the Federal Reserve will continue to raise interest rates. Any indication of a rate hike could strengthen the dollar and cause gold and stock prices to drop. Conversely, if Powell indicates that rate hikes will stop, the dollar might weaken. Markets will closely listen to Powell's speech for any hints of changes in monetary policies or economic outlook. His speech could have significant impacts on the markets. We must pay close attention to the key points of his remarks and, considering current market expectations, be prepared for potential volatility. Please support me with your likes and comments to motivate me to share more analysis with you and share your opinion about the possible trend of this chart with me ! Best Regards , Arman Shaban
OANDA:XAUUSD
by ArmanShabanTrading
6
The US Election and Possible Fed Rate DetourCBOT: Micro 2-Year Yield ( CBOT_MINI:2YY1! ), Micro 10-Year Yield ( CBOT_MINI:10Y1! ) Last Thursday night, I watched the first Biden-Trump presidential debate live on TV, along with tens of millions of likely voters of the 2024 US presidential election. Who won the debate? According to the exit poll conducted by 538/Ipsos: • 60.1% of the likely voters being polled said former President Trump performed best; • Only 20.8% said President Biden performed best at the debate. However, the debate may not change the minds of many voters. • Biden gained support from voters who would likely vote for him, from 46.7% before the debate, to 48.2% after that; • Trump also gained support modestly, from 43.5% to 43.9%; • Robert Kennedy, Jr., an independent presidential candidate who did not participate in the debate, saw his support increase from 17.3% to 18.4%. What mattered most to voters? • Inflation or increasing costs is the No. 1 issue, called out by 50% of the likely voters; • Immigration came in 2nd at 37%, while Political polarization is the 3rd at 25%. The second and final presidential debate is scheduled on September 10th. Ahead of this, the Republican National Convention will be held on July 15th-18th. Donald Trump is likely to be nominated as the Republican candidate for the US presidential election. The Democratic National Convention will be held on August 19th-22nd. After his poor performance in the first presidential debate, we are uncertain if President Biden will be nominated, or replaced by an alternative candidate. On TradingView, our focus is always on trading and investing. However, geopolitics plays a crucial role in shaping global markets, influencing economic growth, investment flows, and asset prices. Understanding the complex interplay between political events and market dynamics is essential for investors seeking to navigate the ever-changing landscape. That being said, I would like to outline these generic scenarios: • If President Biden is re-elected for a 2nd term, he would likely maintain similar political and industry policies which we have been seeing in his first term; • If Former President Trump returns to the White House, we would likely see huge reversal in the policies enacted by the current Administration. What Donald Trump did in his first term will be a good indicator for what lies ahead. Looking across asset classes, I think the interest rate regime will be impacted the most in a Trump-winning scenario. The US Interest Rate Regime In the 21st century, we have four US presidents so far: George W. Bush (2001-2008), Barack Obama (2009-2016), Donald Trump (2017-2020) and Joe Biden (2021-2024). The US Federal Reserve also has four Chairmen: Alan Greenspan (1987-2005), Ben Bernanke (2006-2013), Janet Yellen (2014-2017) and Jerome Powell (2018-2026). I observe that Fed Funds Rate exhibited unique pattern under each president. Let’s look at President George W. Bush first: • The younger President Bush came into the White House when the Internet bubble just busted, and the Enron and WorldCom scandals shook the stock markets. “9/11” occurred less than 8 months into his presidency. • Fed Chair Alan Greenspan executed steep rate cuts to rescue the economy in crisis, pushing the Fed Fund rate down to 1% from 6.5%. • By 2004, the economy has recovered and became overheated. To combat inflation, Chairman Greenspan hiked interest rate all the way to 5.25%. • High interest rates busted the subprime housing market, triggering the Great Recession of 2008. New Fed Chair Ben Bernanke steered the country through the financial crisis, and lowered interest rates to 0-25 basis points. The Obama Administration (2009-2016): • President Obama inherited the Zero Rate environment, and throughout most of his 8-year presidency, interest rates largely stayed at the ultra-low levels. • In the 3rd year of her Fed Chair tenure, Janet Yellen began raising interest rates, from 0-25 bps to 1.25% by the end of her four-year term. The Trump Administration (2017-2020): • In November 2017, President Trump nominated Jerome Powell as new Fed Chair. • Chairman Powell continued the rate hike and raised the Fed Funds rate to 2.25%. • President Trump openly criticized his Fed Chair and intervened central bank policy. • Under great pressure, the Fed lowered rates in 2019. With the pandemic sending the economy into a free fall, Fed Funds rate was back to 0-25 bps by April 2020. The Biden Administration (2021-2024): • During the pandemic, a global supply chain bottleneck pushed US inflation to a 40-year-high at 9.1% by July 2022. • Albeit initially assessing the inflation as transitory, the Fed launched a series of rate increases beginning March 2022, pushing the Zero Rate to 5.25-5.50% by 2023. • While the US CPI came down to about the 3-3.5% range, the Fed was hesitant to lower rates too early. It had maintained the current rate in the last seven FOMC meetings. As we observed from the above, Donald Trump strongly believes that high interest rates would hurt the economy. He would go out of his way and convince the Fed to lower rates. What he considered “too high” was 2.25% in 2018. The Fed Funds rate is now more than doubled at 5.25-5.50%. In my opinion, in a Trump-winning scenario, he would call for the Fed to lower rates as soon as he returns to the White House. The Fed would cave in again, and quicken its rate cut schedule. Trading with CBOT Micro Yield Futures For someone who shares my view of aggressive rate-cut schedule under a new Trump Administration, he could express it by trading with CBOT Micro Yield Futures. Unlike bond futures, Micro Yield contracts quote the respective interest rates directly. A lower interest rate means lower futures prices. Last Friday, the August contract of Micro 2Y Yield futures (2YYQ4) were settled at 4.628%. Each contract has a notional value of 1,000 index points, or $4,628 at the current price. To buy (long) or sell (short) 1 contract, a trader needs to deposit an initial margin of $330. The August Micro 10Y Yield (10YQ4) settled at 4.318%. Notional value is 1,000 index points or $4,318. Initial margin is $320. In my opinion, rate cuts are coming, but the timing is uncertain. At what point the presidential pressure will cause rate cuts to speed up is also uncertain. To counter the uncertainty, a trader could use a Futures Rollover strategy. This is to maintain a Short position on Micro Yield Futures over time. When an existing contract is about to expire, we could close the position by buying the same contract, with the long order offsetting the short position. Meanwhile, the trader could enter a Short position with the newly listed 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
CBOT:ZQ1!Short
by JimHuangChicago
4
DXY ( US DOLLAR Index ) Analysis 19/05/24Scenario 01 : if the Federal Reserve raise interest rates : Probability of this to happend is lower in my opinion but could happend somehow 1. *Dixie (USD Index):* Typically, when interest rates rise, the value of the dollar strengthens. This is because higher interest rates attract foreign investment, increasing demand for the dollar. So, the Dixie would likely see an increase in value. 2. *U.S. Dollar Index:* If interest rates rise, the U.S. Dollar Index, which measures the value of the dollar against a basket of other major currencies, would likely see an uptick as well. Again, this is due to increased demand for the dollar from foreign investors seeking higher returns. Scenario 02 : if the Federal Reserve keeps interest rates the same: 1. *Dixie (USD Index):* If interest rates remain unchanged, the dollar's value might stay relatively stable. Without a change in interest rates to attract or deter investment, the Dixie may not experience significant fluctuations. 2. *U.S. Dollar Index:* Similarly, the U.S. Dollar Index could remain steady if interest rates are unchanged. It might experience some minor movements based on other economic factors, but overall, it's likely to maintain its current level. Scenario 03 : if the Federal Reserve Cut / Lower interest rates: (Probability is High because of the inflation is high and Jerome Mentioned he might Cut rates in the next meeting) 1. *Dixie (USD Index):* Lowering interest rates usually leads to a decrease in the value of the dollar. This is because lower rates make it less attractive for foreign investors to hold onto dollars, as they can find higher returns elsewhere. So, the Dixie might depreciate. 2. *U.S. Dollar Index:* A cut in interest rates could lead to a decline in the U.S. Dollar Index as well. Lower rates could weaken the dollar's value relative to other currencies, causing the index to decrease. In summary, changes in interest rates by the Federal Reserve can have significant impacts on both the Dixie and the U.S. Dollar Index, influencing their values in the foreign exchange market.
TVC:DXY
by TraderFa9ir
BTC in bullish flag - but 20k USD impulse move next?BTC is in a parallel channel, bullish in a flag pattern. Based on this, the next impulsive move would be a approximately 20k (roughly height of the flagpole) one taking it to, depending on the point of breakout, approx 80k. But does anyone really believe or expect this in this current economic climate (Europe in recession, US tech job losses?) 20k, really? The answer mainly would lie in economic fundamentals, i.e. interest rates. If the Fed starts decreasing rates, which people are broadly expecting sometime this year, then the chances of the 20k impulse breakout are higher and the pattern will hold. The next question then is how much would the rates have to fall to get such a large impulsive move and not just a fakeout? This is largely impossible to forecast. Looking at the past, a near 40k move needed approx a 5% rate rise (in itself something that goes against the conventional wisdom of a climate if low rates are needed for crypto impulsive moves). Thus, it would be fair to say the fed would need around a min of 1.5% cut over the rest of the year to arrive a 20k rise in BTC Keeping the rate the same will just most likely cause patern continuation until the prices have reached so low (around 50k) such that the flapole is no longer valid. The way to trade this is two fold: Swing trade upon your expectations of a rate cut. If you think one is imminent within the next 6 weeks, then now is a good enough time as any to ride the rollercoaster. Margin trade (extremely risky): upon breakout of the pattern, with a 3 day filter for a fakeout, and on the back of a rate cut, enter a trade with a 3k stop loss and a 9k take profit. The questions then that any trader/investor has to ask themselves is: do I think the fed will cut rates? If so, when? And how many times? And do I think all those cuts will be enough for new impulsive move of about 20k based on the current flagpole. Personally, as multiple cuts will be needed, to hit 20k, and I'm not in the business of predicting whats in Powell's mind, I think waiting until there is a cut for a swing trade offers the best option.
Long
by slip_stream
1
BIG SHORT XAUUSD DON'T MISS ITWhy might Gold prices decline? Persistent Inflation: When prices exhibit stickiness, it means they don't adjust swiftly to changes in supply, demand, or the overall economy. If inflation remains high despite efforts by the Federal Reserve (the Fed) to manage it through interest rate adjustments, this scenario is termed sticky inflation. Federal Reserve and Interest Rates: Typically, the Federal Reserve cuts interest rates to bolster economic activity or counter economic downturns. Initially, in response to high inflation, the Fed might lower interest rates to spur borrowing and spending, thus stimulating economic growth. However, if inflation remains stubbornly high or continues to climb, the Fed might pause or reverse its rate-cutting measures to curb further inflationary pressures. Impact on Gold Prices: Gold is often seen as a hedge against inflation. As inflation increases, investors may turn to gold as a store of value since it tends to preserve purchasing power better than fiat currencies during inflationary periods. Yet, if the Fed stops cutting rates due to sticky inflation, it could suggest a potential economic slowdown or a tightening of monetary policy, potentially easing inflationary pressures in the long run. Market Sentiment and Expectations: If investors believe that the Fed's decision to halt rate cuts will effectively address sticky inflation and stabilize the economy, it could shift market sentiment. Investors may become less worried about inflation and less inclined to hold onto gold as a hedge. Consequently, this reduced demand for gold could lead to a decline in its price. In summary, if sticky inflation prompts the Fed to pause rate cuts, it could mitigate inflationary pressures and potentially diminish the attractiveness of gold as a safe haven asset, causing its price to decline. However, market dynamics are intricate and influenced by various factors beyond inflation and interest rate policies. Let us know what you think? make sure to leave a like :) Greetings, Zila
OANDA:XAUUSDShort
by ZILATRADES
COF - Capital One Drop and Pop LONGCOF is shown on 1 15 minute chart. The trade idea is to play the drop in a bank stock as a reaction to the sticky inflation report and the idea that a rate cut already baked into stock price is about to come off the table. This is a risky reversal trade. However, with risk comes reward. The idea is on the chart. I will take a long trade here anticipating a return of 2% and about seven times risk. A call option for an expiration of 4/19 will also be in the position, striking 141. See also
NYSE:COFLong
by AwesomeAvani
lets talk about halving Take your time to readCRYPTO:BTCUSD This is not a trend analysis or signal of any kind just my own speculation about what may come to happen after the halving . as we know the last cycle coincided with the fed cutting rates and the money printing going crazy like brrrrr . although we can expect at least another round of rate cuts in 2024 nothing is really guaranteed this cycle . we've been seeing consolidation in the BINANCE:BTCUSDT chart for the last couple months . now I'm not really bearish but what scares me is that last time we had the rate cuts then the halving kicked in and we gone from nearly 3k all the way to 64k before any major correction . If a sell the news event was going to occur after the halving we could expect a few weeks to a couple months of downward selling pressure on bitcoin price before major upside gains . I don't say such scenario will happen but it's better to be prepared incase of such event . what i personally do is just have 50 percent of my capital ready to invest if the markets go down as the result of a black swan event because we do have the institutional support this cycle but at the same time after about 4 years of experience in the markets i know that brokers and institutions love to liquidate the retail before major moves . So i think although the trend is bullish in the long term we might have extra volatility in the short term and it pays to be ready for any possible move . thanks for your time. use this information with due diligence.
CRYPTO:BTCUSD
by Atlas_Tradingclub
Fed keeps rates steady, Banxico up next The US Federal Reserve has kept interest rates steady at 5.25%-5.50% while continuing its balance sheet reduction as planned since May 2023. In contrast, the Bank of Mexico (Banxico) might announce a rate cut tomorrow. It's anticipated that Banxico could decrease its interest rate from 11.25% to 11%, potentially applying pressure on the Mexican peso. This could drive the USD/MXN rate closer to the 17.00 mark, diverging further from its 10-year low. Some Fib levels from its recent swing higher could also be some interesting, more assessable, targets However, the possibility of a rate cut from Banxico is not guaranteed, given potential divisions within its Governing Council. Recent speeches by officials indicate a 3-2 split, with some members leaning towards a more accommodative approach, while others like Jonathan Heath and Irene Espinosa Cantellano favor a hawkish stance.
by BlackBull_Markets
The end of the S&P uptrend?There has been a 12 week uptrend channel in the H4 timeframe starting from January 2024 through to today. The S^P is now showing weakness as follows: 1) There is a triple top on H4 at 5190 2) Bearish Divergence 3) Resisted for 2 weeks in a row 4) Harmonic pattern to sell Remember when a long bull run is broken, the bear run will be of a similar length. Can you put up with 12 weeks of bearish moves? Time to take money off the table or if you are like me, go SHORT now.
SP:SPXShort
by JD_TeenTrader
DXY: Will the Fed Be a Catalyst for Direction in the USD Index?For the past two weeks, the DXY has been trading within a frustratingly narrow range, lacking clear direction. Today's FED press conference may provide some resolution to this stagnant pattern. Leading up to this event, prominent Fed members have cautioned against overly optimistic expectations regarding future rate cuts. They emphasized that the Fed does not intend to reduce the benchmark rate as rapidly as markets had anticipated. Supporting data further reinforced the Fed's stance. December's CPI surpassed expectations, indicating persistent price pressures, although much of this was influenced by base effects that are now mostly behind us. Additionally, January's flash PMI data and Q4 GDP print were strong, albeit slightly lower than the 4.9% growth seen in Q3. Despite this, equity markets rallied, and the unemployment rate now stands well below 4%, suggesting a positive outlook for a 'soft landing' or 'golden path' scenario. If the Fed identifies upside risks to services inflation due to the strong data, it will proceed with caution. However, there's a general expectation that the Fed's statement will adopt a more neutral tone. Technically, as indicated in the posted chart, the DXY is trading within a defined range between the 103.10 zone and the 103.70 zone. A breakout from either of these zones could provide insight into a medium-term direction. In my view, considering the market's overly optimistic anticipation of rate cuts and the upward pressure on prices, we may see a breakthrough above resistance. In such a scenario, a bullish medium-term trend could emerge, potentially driving the index back towards the 107 zone.
TVC:DXYLong
by Mihai_Iacob
2
Fed Policy Trajectory and Interest Rate OutlookCBOT: Micro 2-Year Yield ( CBOT_MINI:2YY1! ), Micro 10-Year Yield ( CBOT_MINI:10Y1! ) and Micro 30-Year Yield ( CBOT_MINI:30Y1! ) The latest US jobs report showed that employers added 216,000 jobs for December while the unemployment rate held at 3.7%, reported by the Bureau of Labor Statistics (BLS). That compared with respective market estimates of 170,000 and 3.8%. On Thursday, the BLS will release December’s CPI data. The prevailing market expectation is 0.3% monthly increase for headline CPI, up from 0.1% in November. The Federal Reserve sets monetary policy to support price stability and full employment. New data shows that the US economy is very resilient, and maybe slightly overheated with the upbeat job market. After hiking interest rates 11 times and pausing for 2 times, the Fed now has a dilemma. “To cut, or Not to cut”, this is a trillion-dollar question. In this 3rd installment of new year outlook for major asset classes, I will discuss what opportunities may lie ahead for bonds and interest rate derivatives. FYI: The first writing was a year-end review for metal commodities – Gold, Copper, and Aluminum. If you haven’t read it yet, you may follow the link here: The second writing was New Year outlook for US equities – the benchmark market indexes Dow, S&P 500 and Nasdaq 100. 2023: what’s the dominating market narrative? Last year, the Fed raised interest rates four times for a total of 100 bps. This was a slower pace comparing to the year before, where we saw seven rates hikes and 400 bps in total. To the surprise of most analysts, businesses continue to expand and hire new workers under tightened credit. Inflation could creep up with higher wages and a strong job market. US stock market rose for most of the year, shaking off bad news along the way. Despite interest rates are 5% higher than two yeas ago, major market indexes reached all-time-high records last December. The S&P 500 gained 23.9% for the year, and the Nasdaq Composite more than doubled that at 53.9%. 2024 Outlook for US Interest Rates Most investors agree that the Fed will cut rates in 2024. But the expectations for the timing and scope vary significantly. According to CME Group’s FedWatch Tool, the first rate-cut could occur at the March 20th Fed meeting, with a 69.2% probability. For June 12th, the odds of two or more rate cuts increase to 85.9%. By December 18th, investors expect the Fed Funds rate to fall between 1% to 2% lower than the current 5.25-5.50% range, with a 97.9% odds (Data as of January 7th). (Link: www.cmegroup.com) Treasury prices and yields move in opposite directions. Current bond prices reflect the market expectations of 5-8 rate cuts in 2024. Lower yields, higher prices. The January 2nd CFTC Commitments of Traders report (COT) shows that “Leveraged Funds” hold the following open positions on CBOT interest rate futures: • Fed Funds: 224,772 longs and 489,204 shorts • 2Y Treasury: 775,882 longs and 2,266,563 shorts • 5Y Treasury: 844,600 longs and 2,821,682 shorts • 10Y Treasury: 285,598 longs and 775,882 shorts • 30Y Treasury: 79,124 longs and 497,636 shorts The overwhelmingly Net short positions indicate that the “Smart Money” considers the rate cuts being oversold. Why do they want to short Treasury futures? If the Fed keeps the interest rates higher for longer, or implements fewer rate cuts, Treasury yields would be higher than the current price indicated. Higher yields, lower prices. Shorting Treasury futures expresses the viewpoint that Treasury bond prices would fall. In my opinion, the bond market tends to tell a better story, compared to the stock market. The institutional nature of most participants allows the bond market to be less prone to irrational hypes and price bubbles. Trading with CBOT Micro Yield Futures Micro Treasury Yield Futures are low-cost instruments to participate in the bond market. Micro yields are quoted by treasury yield directly. Higher yields, higher futures prices. This would ease the burden from working the complicated price and yield conversion. Last Friday, the February contract of Micro 2Y Yield futures (2YYG4) were settled at 4.186%. Each contract has a notional value of 1,000 index points, or $4,186 at current price. To acquire 1 contract, a trader is required to deposit an initial margin of $340. The February Micro 10Y Yield (10YG4) was settled at 4.008%. Notional value is 1,000 index points or $4,008. Initial margin is $320. The February Micro 30Y Yield (30YG4) was settled at 4.221%. N notional value is 1,000 index points or $4,221. Initial margin is $290. My reasoning: We just had a hotter than expected jobs report for December. If CPI data shows inflation rebound this week, the whole Fed cut narrative could be derailed. The January 30th Fed meeting could have a surprised rate decision, or a more hawkish Fed statement. To replicate the short bond futures strategy used by Leveraged Funds, investors could long the micro yield futures to express the same view of higher yields. Initial margins for 10Y Micro Yield are $320, compared to $2,125 for 10Y treasury notes futures (ZN). Hypothetically, if the yield goes up by 25 bps, a long Micro Yield futures position would gain $250 (= 0.25 x 1000). This would be the same for 2Y, 5Y, 10Y and 30Y micro yield futures, as they all have a 1,000-point multiplier. On the other hand, if investors continue to ignore the Fed, as they have often been in the past two years, short futures will lose money. 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_MINI:10Y1!Long
by JimHuangChicago