JimHuangChicago

JimHuangChicago Wizard

CME: Micro USD/JPN Futures ( CME_MINI:M6J1! ) On September 21st, the Fed raised interest rate for the fifth time. The very next day, Bank of Japan decided to keep the country’s short-term interest rate at -0.10%. On November 3rd, the Fed raised another 75 bps, and the Fed Funds rate is now 3.75-4.00%. Interest rate spread between the two countries now reaches 4%....

JimHuangChicago Wizard

CME: E-Mini S&P 500 Futures ( CME_MINI:ES1! ) If the characters of Game of Thrones were on the financial markets, who would be the unchallenged “King of Wall Street” in your eyes? Since Federal Reserve set sail on tightening monetary policy, all markets fell under the spell of Fed rate hikes. Federal Open Market Committee meetings are major market-moving events....

JimHuangChicago Wizard

NYMEX: Dutch Natural Gas ( NYMEX:TTF1! ), Henry Hub Natural Gas ( NYMEX:NG1! ) and WTI Crude Oil ( NYMEX:CL1! ) Amid a deep energy crisis faced by Europe, Dutch natural gas futures hit a new record of €350 per megawatt hour in August. Governments across the European Union adopted new rules to reduce electricity usage. In just two months, with a dramatic turn of...

JimHuangChicago Wizard

What We Expected When the ball dropped in Times Square at midnight December 31st, we had very good reasons to cheer for Year 2022. S&P 500 ended 2021 at 4,766.18, up 27%. In fact, the index was more than double in a 2-year bull market since the pandemic drove it down to 2,230 in March 2020. U.S. Bureau of Labor Statistics (BLS) reported monthly growth of...

JimHuangChicago Wizard

CBOT:ZQ1! We are in a rising interest rate environment. But wait, which rate are you talking about? All eyes are on the Federal Reserve. But could you really borrow money at the Fed Funds rate? If not, why is it a big deal? Most of us deal with different types of interest rates, such as those for bank deposit, mortgage loan, home equity loan, auto loan, credit...

JimHuangChicago Wizard

CME_MINI:M6B1! U.K. financial markets went into a freefall last week as Prime Minister Liz Truss announced aggressive income tax cuts amid deep fiscal trouble. British pound is trading at $1.11 to USD, half of its value in 2007. However, it’s unfair to blame everything on a new PM and a new King. Both got their jobs just a month ago. Sterling’s downfall...

JimHuangChicago Wizard

CBOT: Micro 10-Year Yield ( CBOT_MINI:10Y1! ) Last Friday, U.S. stocks plunged again as soaring interest rates and FX market turmoil fueled investor fears of a global recession. The Dow fell below 30,000 and closed at 29,590, down 486 or -1.6%. S&P 500 broke through 3700 and settled at 3,697, down 1.72%. Nasdaq Composite lost nearly 200 points and closed at...

JimHuangChicago Wizard

COMEX: Gold Futures ( COMEX:GC1! ) Last Tuesday, September 13th, the Bureau of Labor Statistics reported that U.S. Consumer Price Index rose 0.1% in August to an annual rate of 8.3%. Both were higher than market expectations of -0.1% and 8.1%, respectively. One tenth of one percent didn’t seem much, but it refuted the mainstream notion that inflation has already...

JimHuangChicago Wizard

When the Russia-Ukraine conflict first broke out, world markets were in a complete shock. Equities fell and commodities rose as geopolitical tension became the dominant price driver. As fighting dragged on from weeks to months, other important factors took over. Besides the traditional supply and demand variables, we have witnessed a record shattering inflation...

JimHuangChicago Wizard

WTI crude oil is currently trading at $83 a barrel. Who would have thought that with OPEC cutting oil production and Russia shutting down natural gas distribution, petroleum would be $10 cheaper than when the Ukraine War first started? Winter is coming to global economy. And financial markets everywhere would be bracing for a deep freeze in the coming...

JimHuangChicago Wizard

This is the 2nd installment of “The Great Wall Street Repricing” series. The price of a commodity is determined by the interaction between the demand and supply of its market. This year, such interaction acts like a Tug of War. On the one hand, tight supply pushes commodity price upward; on the other hand, weak demand pulls the price back down. Commodity prices...

JimHuangChicago Wizard

Equity Indexes: CME Micro S&P 500 ( CME_MINI:MES1! ), Micro Russell 2000 ( CME_MINI:M2K1! ) On August 26th, Fed Chairman Jerome Powell declared to forcefully fight the worst inflation in 40 years. He warned that the Fed would continue raising interest rates, even if it would cause "some pain" to the U.S. economy. In an eight-minute speech at the Jackson Hole...

JimHuangChicago Wizard

CME: S&P 500 CME_MINI:ES1! ; NYMEX: WTI NYMEX:CL1! and Henry Hub NYMEX:NG1! ; COMEX: Copper COMEX:HG1! and Aluminum COMEX:ALI1! The 2020 U.S. presidential election put Democrats in control of the White House and both branches of the Congress. In the upcoming mid-term elections, if Democrats retain their majority, Joe Biden will become the most powerful U.S....

JimHuangChicago Wizard

CME:LE1! The U.S. Bureau of Labor Statistics (BLS) released July non-farm payrolls on August 5th and July Consumer Price Index (CPI) on August 10th. Both reports beat market expectations. About 528,000 new jobs were created in July, well above June level. Annualized Inflation was lowered to 8.5% from the record 9.1% in June. While strong jobs data and taming...

JimHuangChicago Wizard

CME:HE1! CBOT:ZC1! CBOT:ZM1! On August 1st, USDA Daily Hog and Pork Report shows that benchmark Iowa Carcass Base Price averages $128/cwt. This is a 15% increase year-over-year, and a whopping 70% higher than the five-year average of $75. Is pork still affordable? Meanwhile in the futures market, while August Lean Hog contract (HEQ2) is quoted at...

JimHuangChicago Wizard

CBOT_MINI:10Y1! CBOT_MINI:2YY1! The Federal Open Market Committee (FOMC) is scheduled to meet on July 26-27. Market widely expects a 75-basis-points (bps) Fed Funds rate increase, from current target of 1.50%-1.75% to 2.25%-2.50%. The call for a 100-point hike, while still feasible, is weakened after U.S. gasoline price dropped 70 cents per gallon in the past...

JimHuangChicago Wizard

CBOT:ZW1! On June 15th, I issued an options trading strategy on CBOT Wheat Futures. At the time, I expected wheat price to experience a very large move but was unsure of its direction. Consequently, I recommended a Long Strangle options strategy : Purchase both an out-of-money (OTM) call and an OTM put on September Wheat Futures. The original trading idea may...

JimHuangChicago Wizard

CME:6E1! The U.S. dollar reached 1:1 parity with Euro on Tuesday for the first time in 20 years. Wall Street may tell you that the common currency for 19 European countries has been hammered by economic woes, high inflation, and an energy supply crisis brought by the Russia-Ukraine conflict. I have a very straight-forward answer to the depreciation of the...