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Where are commodities heading to? Beyond 2022Where are the meat or commodity prices heading? Meat prices have been rising at a rate of about 3% per annual over the last 40 years. Meat is what I classified as an edible commodity, so is corn, wheat and rice. And as these commodities start picking up in prices, they are the one that will give the central banks a huge headache and to consider to hike its interest rates than the other commodities in the CPI basket. Why is this so? In short, people can still live with some inconvenience without cars or petrol, but not without food. Therefore, there is an urgency for the policy makers to first take care of the basic needs of the people. Content: . Long-term direction of Live Cattle . Trading ideas . Investing ideas Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. A little hack here to project the coming CPI data and also to know how aggressive the Fed will be with interest rate hike - you may consider to track the development of these edible commodity prices, if it is still trending up, we should be expecting a higher CPI and interest rates. Example on Live Cattle Futures: 0.025cts = US$10 0.10cts = US$40 145.00 = 1450 x US$40 = US$58,000 From 144 to 145 = US$400
CME:LE1!
by konhow
9
XAUUSD - GOLD CURRENT SITUATION#XAUUSD According to the analysis we gave to XAUUSS earlier, the TREND LINE BREAKED and UP about 160 PIPS. We hope you get it. We have some very important NEWS coming to the USD this week, especially tomorrow. So we have to wait a bit until we get them. US INFLATION DATA to be released. Therefore, you should definitely pay attention to GOLD. Anyway, with US10Y DOWN, GOLD is going up a bit now. Anyway, we expect that GOLD will go UP to 1794 LEVEL. After that GOLD can definitely go down to 1671 LEVEL. Be careful..
OANDA:XAUUSD
by benny_marshall
Pig Market: Why IDC about the CPI8.5 prior 8.1 expected 8.24 cleveland fed estimate ??? actual Everyone is going crazy about this CPI data like its gonna change anything. We already know inflation has peaked and will start to decline. It's doing that because the economy is slowing. The fed is still hiking and the inflation isn't going to go away fast enough for a soft landing. The markets may adjust to the data tomorrow, but it's not going to change our destiny: a recession by end of year. Find the next peak, sell it, or short it. This moon mission is cancelled and you'll be stranded in space.
AMEX:IWMShort
by coinhoIio
1
Has inflation really peaked? Not so sureWe have been inside this green triangle since 1915. The downtrend line has been tested a few times and this is the first year it actually went past it and recently came down for a retest. Hard to feel like inflation has peaked also considering oil is still in an uptrend and the Fed couldn't have been more hawkish in the last Powell's speech, so we may be up for a rough surprise in tomorrow's CPI report. The Fib retracement points at a possible 12.50-13.00% inflation read, let's see what we get.
ECONOMICS:USIRYYLong
by NightCommando
What If Ukraine Wins?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 rate, aggressive rate hikes by the Fed and ECB, and growing worry of a global recession. While geopolitical risk has been put in the back burner, it never went away. In recent days, Ukrainian forces launched a military offensive and retook Kharkiv, a Russia-occupied stronghold in eastern Ukraine. Would this be a breakthrough in the 200-day war? How would it impact world markets? Should we adjust previously employed strategies given this new development? To answer these questions, let’s first revisit our Three-factor Asset Pricing Model: Asset Price = Intrinsic Value + Market Sentiment + Crisis Premium Where, • Asset Price – Expected Price of an asset at time t, • Intrinsic Value – Trader defined fair value. It could be estimated by fundamental supply and demand factors or technical indicators. If you don’t have one, simply use the market price. This is our baseline price. • Market Sentiment – Bullish or Bearish sentiment. This can be considered the supply and demand of investor money. More buying pulls the price up above the intrinsic value. More selling pushes the price down. • Crisis Premium – When a crisis breaks out, it could introduce an “Event shock” to the market. It is a dummy variable, with 1 denoting a crisis, and 0 indicating the lack of it. In our exploration of event-driven strategies on binary outcomes on June 16th ( ), we defined the Russia-Ukraine Conflict by two possible outcomes: War and Peace . War includes all scenarios that the Ukraine conflict would continue or intensify. For the second outcome, how could peace be restored? It could come as a Russian victory (Win), a peace deal between Russia and Ukraine (Draw) or a Russian defeat (Loss). The recent Ukrainian military advances raise the possibility of an armistice. Would we see a reversal of the initial crisis shock if peace is in reach? Let’s examine the following commodities. Wheat CBOT:ZW1! In 2021, Russia accounted for 17% of global wheat export, while Ukraine had a 11% share. CBOT Wheat Futures shot up 75% two weeks after the conflict started. The price shock was a market response to “perceived” loss of 28% of global wheat supply in a worst-case scenario. Market panic tends to over-shoot. Irrational price movement could be totally out of proportion of the actual supply loss. As the conflict continued, Russian wheat found new markets in China and Iran, despite an international sanction in place. In August, Ukrainian grains resumed shipping through the Black Sea thanks to a Russia-Ukraine deal brokered by Turkey. Wheat price pulled back to below $8 a bushel as investor realized that this big portion of wheat supply is not totally wiped out even the fighting never stopped. CBOT Wheat is quoted at $8.69 a bushel last Friday, almost at the same price level when the conflict started. Where will it go next? • If fighting intensifies (War), wheat price could possibly go higher on the back of high energy price and high interest rate. • However, if a peace deal is struck (Peace), release of huge supply from both Russia and Ukraine could send wheat price sharply down. We employed a Strangle Option Strategy on CBOT Wheat Futures in June, which carried an out-of-the-money (OTM) Call option and an OTM put option. We expected a big price move as imminent, but its direction uncertain. It appears that we are in a similar situation again. Natural Gas NYMEX:HH1! NYMEX Henry Hub Natural Gas Futures was trading at approximately $4.50 per MMBtu before the conflict. It went up 70% in the following two months and was more than doubled to $9.2 by early June. After recession fear sent natural gas price down to $5.5, it has come back up above $8.00 as Russia cut off natural gas supply from the Nord Stream 1 pipeline. This triggered a major energy crisis across Europe. What would happen next? • War: Natural gas price will surge higher. Liquified natural gas from the US is more expensive, and not adequate to replace the Russian supply. Europe will be looking at an extremely cold winter. • Peace: Sanctions will be ended. The huge oil and gas supply from Russia would flow back to global market, sending energy price sharply down. Similar to CBOT Wheat, we may consider a Strangle Option Strategy on NYMEX Henry Hub Natural Gas Futures, and to buy OTM call option and OTM put option simultaneously. This trade is based on our expectation that a big price move is imminent, but its direction is uncertain. Euro-USD Exchange Rate CME:6E1! Interest rate parity (IRP) states that the interest rate differential between two markets is equal to the differential between the forward exchange rate and the spot exchange rate. As Federal Reserve started raising interest rates in March, Euro has seen the biggest depreciation against the dollar in 20 years. The battle between USD and Euro may also be viewed as a game of relative strength. • US could raise interest rates faster than Europe; • US could control inflation better than Europe; • US unemployment could be lower than Europe; • US economy could perform better than Europe, soft landing vs. hard landing; • Energy crisis could worsen in Europe as winter approaches. A peace deal could change everything. It would validate the strength of European nations in support of Ukraine. Market confidence and bullish investor sentiment would be powerful enough to reverse the steady decline of Euro currency. Peace, Euro up. War, Euro down. It looks like a Strangle option strategy to me again. The Equity Market CME_MINI:ES1! Up to this point, I have been fairly bearish about US Equity Indexes. Based on the Discounted Cash Flow (DCF) asset pricing model, I expect Fed Rate Hikes and High Inflation to suppress stock valuation. • High interest rate increases the discount factor WACC (Weighted Average Cost of Capital), the denominator of the DCF equation • High inflation increases production cost and reduces sales volume, which results in smaller free cash flow (CF), the numerator of the same equation • The combined effect is a lower stock valuation Small-cap stock indexes such as the Russell 2000 could be in a dire situation when the fear of recession becomes a real one. Smaller companies tend to have higher cost of capital and could suffer bigger profit loss compared to the Blue Chips. New developments in Ukraine could mean an end of the war. In our three-factor model, the crisis premium could go to zero. Typically, only one factor dominates the market at any given time. In this case, a bullish sentiment could take over. It could drive stock price higher. Investors in a celebratory mood simply discount all the bad news for a while. Geopolitical dynamics is a game changer that investor can’t afford to ignore. Recent development in Ukraine has put a new layer to the series of discussions around “The Great Wall Street Repricing”. If you have made directional bets, this may be a good time to take cover. Financial market is extremely volatile this year. Getting an information edge increases your odds of success in managing risk. I suggest leveraging real-time market data for a better gauge of market situation. Tradingview users already have access to delayed data. A Pro user could upgrade to real-time CME market data for only $4 a month, a huge discount at the time of high inflation. 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.
CBOT:ZW1!
by JimHuangChicago
44
NZD/USD for long? There is a potential inverted head and shoulders pattern on the nzd/usd chart. So it all depends on the CPI numbers; if we see a price drop to the 0.6060 area, and if the CPI numbers come in lower than expected, we can consider the scalp long position relatively safe at that point. Higher CPI numbers are very likely to extend USD strength (in which case you can wait for the bullish pattern to fail and go short), so don't anticipate the numbers and wait for clarity.
by merjemascerija
Commodities: Tug of War between Tight Supply and Weak DemandThis 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 swing wildly as each side battles for supremacy. News that signals supply disruption sends prices flying. It could be geopolitical tension, bad weather, restrictive government policy, or an oil tanker stuck in the Suez Canal. Meanwhile, high inflation, weak housing market, disappointing retail sales, and Fed rate hikes all raise worry of a global recession and the consequential demand reduction. Not all commodities are created equal. I have made some interesting observation: Commodities primarily used as a production input hold up much better than those being consumed by end users. To prove my point, let’s review the price data at market close on September 2nd. In the energy market: • WTI crude oil ( NYMEX:CL1! ) is settled at $86.4 per barrel, down 11.9% month-to-date (MTD) • RBOB gasoline ( NYMEX:RB1! ) closes at $2.38 a gallon, down 23.3% MTD • Oil Supply: There is no elasticity. Crude oil production capacity is capped in any given year • Demand elasticity: Consumers could adjust their driving habit in response to inflation American Automobile Association (AAA) reports today that national average retail price of regular gasoline is $3.809, down 9.1% MTD, but diesel, at $5.067 a gallon, is down less than 4% MTD. Why? Diesel is mainly used for highway transportation of goods by trucks. Delivery routine has less flexibility to change comparing to consumer driving behavior. In the food market: • Corn ( CBOT:ZC1! ), a main ingredient in livestock and poultry feed, closed at $6.58 per bushel, up 6.7% MTD • Lean hog ( CME:HE1! ) is settled at $0.919 per pound, down 3.7% MTD • Corn price is vert sensitive to supply factors such as plant acreage, weather, and yield • Hog price is more correlated to demand factors, including export of US pork, and consumer seasonal changes of dietary habit • Pork has substitutes. When it gets expensive, consumers could switch to cheaper meat. People in poorer countries could simply reduce meat consumption On August 2nd, I expressed my view in a trade idea titled “Short the Hog Margin if You Expect Lower Pork Price” In the metals market: • High Grade Copper ( COMEX:HG1! ) closed at $3.408 per pound, down 4.2% MTD • Silver ( COMEX:SI1! ) is settled at $17.655 per troy ounce, down 12.6% MTD • Both copper and silver are industrial materials. They declined in response to economic slowdown, but there is a significant difference • About 50% of silver supply is used in industrial applications, with the other 50% being used as a previous metal or for daily use • Consumers will buy less silver jewelry in tough times. This explains why silver declined three times as much as copper. In the credit market: • 2-Year Treasury yield ( CBOT_MINI:2YY1! ) closed at 3.514%, up from 2.950% last month • 10-Year Treasury yield ( CBOT_MINI:10Y1! ) settled at 3.272%, up from 2.727% last month • Both went up in response to Fed’s rate hikes, but there is a difference • 2-Year Note has a direct relationship with Fed Funds rate. It reflects the cost of money (rate hike) and the supply of money (quantitative tightening) • The yield of 10-Year Note also reflects money demand in addition to money supply • In an economic downturn, businesses and consumers will reduce borrowings. The spread between deposit interest and lending rate will be tightened • This makes sense – with lower loan volume, banks are willing to make less What about High Interest Rate and High Inflation In the first installment, we discussed the impact of high rate and high inflation from the perspective of discounted cash flow valuation model. • High interest rate increases the discount factor, the denominator of the equation • High inflation increases production cost and reduces sales, which results in smaller free cash flow, the numerator of the same equation • The combined effect is a lower stock valuation Aligning with what we discuss today, we may find the inflationary impacts differ depending on whether the commodities are industrial materials or bulk consumer products. Inflation means higher price. It is generally good for those commodities primarily used as production input, such as natural resources. Energy producers, metal dealers and mining companies have all made record profit this year. However, if persistent inflation eventually leads to a recession, commodity price would fall due to lower demand. It’s an entirely different story for companies producing bulk consumer products. As we discussed earlier, hog farmers get squeezed by higher feed cost and lower meat price. Jewelers would find customer traffic significantly reduced due to higher prices of gold and silver jewelry. The impact of higher interest rates is more uniform for most commodities. It increases the borrowing costs on anyone engaged in producing, processing, transporting, and using the commodities. Higher cost results in lower usage, which would depress commodity price. In addition, a strong dollar raises the price for overseas consumers when they pay with a weaker foreign currency. I think we have covered a lot today. Let’s take some time to digest and identify market opportunities with these observations. Financial market is extremely volatile this year. Getting an information edge increases your odds of success in managing risk. I suggest leveraging real-time market data for a better gauge of market situation. TradingView users already have access to delayed data. A Pro user could upgrade to real-time CME market data for only $4 a month, a huge discount at the time of high inflation. 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.
NYMEX:CL1!Short
by JimHuangChicago
2
The Only Chart That Matters for The Next DecadeConsumer Price Index Year over Year (CPI YOY) vs 2 Year Yield (2YY) vs Fed Funds. To even begin to arrest inflation, the Fed has to get Fed Funds above the 2YY. To break the back of inflation, the Fed must get Fed Funds above CPI YOY. Does the most recent drop in CPI YOY mean that peak inflation is already in? People forget that when inflation runs hot, so does its volatility. For lasting inflation reduction, the Fed has to get to the real neutral rate. And consider that the CPI formula you are seeing in this chart has been altered numerous times, proponents would say to better reflect productivity gains, critics would say to mask real inflation to benefit the government. Whatever you believe, if we calculated CPI the way we did in 1980 it would be nearing 18% . So it's much, much worse than this. This is the only chart that matters for the next decade.
FRED:FEDFUNDS
by UnknownUnicorn1334230
Euro inflation rises, but euro yawnsThe euro continues to have a calm week. In the North American session, EUR/USD is showing little movement as it trades a whisker above the parity line. Inflation in the eurozone continues to move higher. In August, CPI rose to 9.1%, up from the July gain of 8.9%, which was a record high. Core inflation climbed to 4.3%, up from 4.0%. With both the headline and core readings exceeding the forecast of 9.0% and 4.1%, respectively, there will be additional pressure on the ECB to tighten policy more at an accelerated pace. The central bank has been slow to shift its accommodative policy, which was in place for years in order to support the eurozone economy. The ECB now finds itself playing catch-up with inflation, and is also far behind in the tightening cycle compared to other major central banks, with a benchmark rate of just 0.50%. Inflationary pressures remain broad-based, which means inflation is well-supported and unlikely to decline anytime soon. The eurozone inflation report comes just a day after Germany, the largest economy in the bloc, reported that August inflation jumped to 7.9%, up from 7.5% in July and nudging above the forecast of 7.8%. The central bank meets next on September 8th, and there is a strong possibility that the ECB could come out with guns blazing and deliver a super-size 75 basis point increase. A potential energy crisis in Europe continues to hover like a dark cloud, and the uncertainty over whether Moscow will weaponise energy exports remains a massive concern. The Nord Stream 1 pipeline has been shuttered for a scheduled three-day maintenance, but there are fears that Russia will find some excuse and not renew gas flows on Saturday. Any disruptions would likely push European gas prices even higher. In the meantime, the waiting game is on, with Western Europe on edge while it anxiously waits for the gas taps to be turned back on. EUR/USD has support at 0.9985 and 0.9880 1.0068 is a weak resistance line, followed by 1.0173
by OANDA
Hawkish FED Keeps USD In UptrendUnfortunately, stock markets are where they are, and we cannot force them to move in a particular direction. We see a neutral status at the end of the summer, but this volatility may come back in September. We may see some interesting price action already this week when US will release its important jobs data. Fed watches this data closely, but what’s important is that they were very clear lately and said that they will stay hawkish even if FED’s actions will cause some harm to the US economy . So for now, the USD remains in uptrend because of US yields. From an Elliott wave perspective, we see US yields trying to break higher into a fifth wave now, so this can cause even more weakness XXX/USD pairs. But when the fifth wave will hit a new high on yields, that’s when we should be aware of a new change in cycle, ideally later this year. But any major reversals in cylce will not happen that easily, especially now with current FEDs actions and potential bad data. Bad or good data; it doesn’t really matter; the stock market will have a hard time turning back to the highs. Yes, stocks can stabilize if we see bad data, but if we will start seeing bad data week after week then this means a big economic slowdown and a potential recession. Expensive capital, inflation, and economic downturn is a bearish case for stocks. There is simply no "free" cash available to be invested in the stock market.
TVC:US10Y
by ew-forecast
4
Is it almost time for Bitcoin to fly again?Hey Traders. I'm bringing you a mid-week update for a couple of reasons: 1. I will be OoO (Out of Office) the remainder of the week. 2. Many indicators are showing me we are getting very near a bottom here. 3. I want to prepare you to move when the market moves. This could happen while I am OoO. 4. I want to show you the trades I am still in and what I am looking at next. For the record, I closed my Matic short for profit. And I am still long Doge, Gods, NWC. The spreadsheet has been updated with all of the most recent data. And if you don’t have time to watch it, basically, the short and skinny is that we are drawing near to that Sept 13 date when new CPI data is released and the FED makes further commentary on it. All the charts and indicators point to some big moves happening around that time frame. Could go either way but I am fairly optimistic about what the charts are showing me. Take a look at Bitcoin for instance: Here is our longer-term (10 months plus) bullish descending wedge which we are nearing the end of. And inside of this bullish wedge is another bullish wedge: More and more signals are beginning to show green lights soon. Let’s pay attention here. Stew
COINBASE:EOSUSDLong
by stewdamus
2
Why Crude Oil is Trending Higher Again, Breaking Above US$100In this tutorial, I will explain both its fundamental and technical reasons for crude oil likely to break above and stay above US$100. I am having two portfolios at all times, one for long-term investing and the other for short-term trading. For the long-term I am mindful the current global inflationary pressure is real and it may last many months or even years ahead. Therefore, my current investment mandate: • U.S. stock markets – To trade them • Commodities – To buy them Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. For your reference: NYMEX Crude Oil $0.01 = US$10 Example: From $94.00 to $100.00 (10000-9400) x US$10 = US$6,000
NYMEX:CL1!Education
by konhow
1