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Gold Keeps Trading Sideways. Here's Why.In early 2020, following the massive injection of liquidity into the financial markets by the Federal Reserve, many onlookers speculated that the price of gold would go on a massive bull run, comparable to the gold super-cycle we saw in the early 2000's: In that market, gold went from ~$260 per ounce to more than $1,600 per ounce, a gain of more than 500% over the course of a decade. This speculation, of course, was founded in the belief that a higher supply of money, as created by the federal reserve in 2020, would lead to devaluation of the dollar against gold, a "hard" asset. What happened, in retrospect, has been something else altogether. The bull run materialized initially, when gold rallied roughly 40% over just 4 and a half months following the initial pandemic shock: However, what followed was somewhat of a nothing burger, as gold has remained largely range-bound between $1,600 and $2,100 throughout 2021, 2022, and now more than half of 2023: This has been a massive disappointment for gold investors, who likely believed that the M2 expansion in 2020 and 2021, followed by the inflation experienced in 2022 and 2023, would set up gold perfectly to outperform the broader market. (Inflation): Why has gold languished? Where is it headed? Here's our thoughts. First - it's important to take a look at the futures curve to get a sense of market expectations: This chart, provided by the kind folks over at COMEX and visualized right here on TradingView, shows that future expiries of the gold contract, going out over the next 6 years, are pricing in a linear ascent for gold between where it is now, at ~1,950, and $2,200. But is this what the market actually thinks? No. This curve is pricing in the expected appreciation over the next 6 years of gold Vs. the dollar -> it's essentially pricing in inflation. That said, it's still useful for getting oriented. In reality, price discovery of supply and demand is still facilitated by the front month, most liquid contract. So why has gold languished? In our view, Bitcoin has played a massive part in stifling gold's potential ascent: In the chart above, you can hardly make out gold's dramatic increase in 2020, due to the magnitude of Bitcoin's percentage rally. Given the similarities between the products, and with many viewing Bitcoin as "Digital Gold" (a view which we hold as well), we may very well be seeing the disruption of gold as a financial instrument in the use case it has, up until now, owned exclusively. Time will tell. In fact, the CME has launched Bitcoin futures - perhaps an omen of this very dynamic. Bitcoin Futures (Ticker "BTC"): As for where gold is headed next; we think gold should break higher above 2,100 at some point due to historical inertia and increased demand within broader jewelry and industrial use cases. When does a breakout happen? It's anyone's guess. However, when that trade emerges, it should be a great opportunity to catch a breakout towards $2,400 & 2,600, the next fib extension levels: We'll be sure to post about it if and when that happens. Cheers! Looking for high-quality market analysis, along with unique trade ideas? Follow us below for more. ⬇️⬇️
COMEX:GC1!
by PropNotes
16
What Disinflation - Beef Price Went Up 64 percent in 5 YearsCME: Live Cattle ( CME:LE1! ), Lean Hog ( CME:HE1! ) Last month, the Bureau of Labor Statistics (BLS) reported that US inflation on food items was 5.7% in June, exactly half of its peak of 11.4% in August 2022. Food inflation is at its lowest level since November 2021. Under the sub-category “Meats, poultry, fish, and eggs” from Food-at-home, the BLS data shows a negative 0.2%, meaning that meat prices declined in the past year. The official data contradicts my own experience. Anyone who has been shopping knows that the grocery bill gets bigger every month. Last weekend, I surveyed the Beef section at a local Walmart and found the following: • Beef cuts with the USDA Choice label price between $12-$18 per pound. • A primal loin, for example, costs $16.99/lb. Next to Beef is the Pork section. • A full slack of spareribs prices at $1.89/lb. • This is back to the pre-Covid price level. Why is beef so pricy? Will consumers get some relief as food inflation goes down? In this report, I attempt to find out what drives the beef/cattle price up. The Cash Cattle Market According to the National Daily Cattle & Beef Summary published by the USDA, Choice Beef averaged $301.79/cwt (per 100 pounds) nationwide on August 4th. Primal loin cutouts averaged $4.11/lb. This is so much lower than the retail price. But why? The USDA reports transactions occurred at meatpackers, where cattle farmers sell their beef cows. The report shows the value chain throughout the packing process: • Live Cattle: Steer (male cow), 187.55/cwt; Heifer (young female), $187.26/cwt; • Beef Carcass: $284.86 (Choice); • Primal Flank: $214.84 (Choice); • Primal Rib: $457.54 (Choice); • It also lists prices for Chuck, Round, Brisket, Short Plate, Trimmings, etc. From the packing plant, beef goes through cold storage, wholesale, and retail distribution before consumers pick up their favorite meat at the grocery store. During the inflationary period, labor and energy become more costly, driving up the cost of each stage of processing and distribution. Higher interest rates also raise the cost of business overhead. These together widen the price spread between live cattle and retail beef cutout significantly. In the beef cattle value chain, it takes farmers two years to raise the cows, while processing and distribution take maybe two weeks to complete. However, farmers receive only about 20% of the final sales price. The Cattle Cycle and A Shrinking Herd Cattle cycle is the process in which the size of the national cattle herd changes over time, from low point to low point. The cattle cycle averages 8–12 years and is influenced by the cattle prices, input costs that drive producer profitability, the gestation period, the time needed for raising calves to market weight, and climate conditions. If cattle prices and producer profits are expected to rise, producers may expand their herds; if prices are expected to decline, producers will reduce their herds by culling older cows and keeping fewer heifers to replace older cows. Cow-calf producers’ response to price fluctuations may be delayed because of the lengthy gestation period for cattle relative to hogs and poultry. The total number of beef cattle in the United States is highly dependent on the stage in the cattle cycle. Last month, the USDA reported that the latest herd inventory for all cows and calves was 95.9 million, down 3% year-over-year. Beef cow inventory was 29.4 million, also down 3%. The decline in beef cow supply is the main driver for higher beef prices. Over the past 50 years, the US cattle herd has shrunk significantly. • Inventory for all cows and calves peaked at 132 million in 1975. We have lost over 36 million cows or 27% of all cattle supply. • Beef cattle inventory peaked at 45.7 million. We now have 2/3 of peak herd size. A counter argument is that, with technology advancements, we need fewer cows for the same amount of beef supply. The production time gets shorter, and the cows gets bigger. People now have healthier diets and take in less red meat. According to USDA data, per capita beef consumption was 63.3 pounds in 1960. It declined to 59.1 pounds in 2021, down 6.6%. But look at the huge population growth for people. The US had 203.2 million people according to the 1970 Census. US population grew to 331.4 million in the 2020 Census, up 63%. Beef demand clearly outpaced supply as US population grows. Beef Export and Import Interestingly, the US both exports and imports beef. In 2021, the US exported 3.43 billion pounds of beef while imported 3.35 billion pounds. Beef export was mainly higher-grade beef cutouts. And import was lower-grade beef for processing into ground beef. The US used to be a net import country for beef. In 2020, China signed a trade agreement with the US and opened its vast market for US beef import. This resulted in China buying four times as much beef the following year. More export reduces domestic beef supply. This is another factor driving up beef prices. In conclusion, the days of lower priced beef are long gone. Beef prices are expected to remain high, even though food inflation goes down. Cattle and Hog Spread Trade – A Revisit How could we make use of this analysis? On May 15th, I published an idea about a spread trade between CME Live Cattle Futures ( NASDAQ:LE ) and Lean Hog Futures ( NYSE:HE ). The 20-year chart shows that the price spread between live cattle (LE) and lean hog (HE) broadly stays in the range of $20-$60 per 100 pounds but could go up to as high as $100. On May 12th, October cattle contract (LEV3) was quoted $166.2 per 100 lbs., while October hog contract (HEV3) priced at $77.425. Thus, the price spread was $88.775. On August 4th, LEV3 settled at $183.10 while HEV3 was closed at $83.25. The spread has widened to nearly $100. The Impact of Proposition 12 In 2018, California passed an animal welfare law called Proposition 12. It requires that breeding pigs be confined to a pen with no less than 24 square feet of floor space, allowing them to fully turn around in their living area. Proposition 12 applies to not only hog farmers in California, but also any supplier selling hog and pork in the state of California. The hog industry fought hard but lost. The Supreme Court upheld the law in May, and it is finally taking effect in July. The animal welfare law significantly increases the cost of hog production nationwide. Prices of live hog, pork cutout, ham and bacon shall all go up. However, as we are now in summer, a low pork consumption season, cash market price has not yet caught up. In my opinion, the cost factor pushing pork prices up in the short run is greater than the supply-demand force that drives up beef prices in the long run. There may be room to short the cattle-hog spread, until pork prices stabilize in a new equilibrium. A Short Spread trade entails selling 1 CME Live Cattle Futures and buying 1 CME Lean Hog Futures. Both contracts are based on 40,000 pounds of meat and require $1,600 in initial margins. 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:LE1!Short
by JimHuangChicago
26
The Road to $66 for STXUSDT (Stacks)$STXUSD has now beautifully broken out of the triangle after an impressive textbook correction at the 0.618 Fibonacci retracement. This type of correction is a typical feature of wave 2 in an Elliot wave count, which indicates that $STXUSDT is now ready to embark on its third impulsive wave, often referred to as the most explosive one. Considering the increasing volume, an explosive surge in the number of transactions on the network, and the oscillators, we can expect a swift development in the price towards the following resistance levels: — 0.57 — 1.06 — 2.85 — 5.96 — 8.16 — 13.17. #stxusdt #stxusd #BNS #DeFi #BitcoinNFTs #Stacks
Long
by joerivdpol
20
Earn 18% While Waiting To Buy AMD At SupportHey guys! Today, we're looking at a Trade Idea in AMD, the popular semiconductor company that often plays second fiddle to Nvidia (NVDA). Like most of our trade ideas, this post focuses on selling put options - this time, on AMD shares. In case you're unfamiliar with options -> when you sell a put option, one of two things happens. Either; A.) The stock price finishes above the strike price of the put when the put expires, in which case you make money. B.) The stock price finishes below the strike price of the put when the put expires, in which case you will be forced to buy the stock at the strike price. With the trades we publish, if the stock goes up, sideways, or down a bit, you'll make money. If the stock goes down a lot, then you'll be forced to buy shares. In other words- either make money, or buy the dip! The trick is finding the right stock at the right time. Right now, AMD seems like a great candidate for this strategy. Selling the October 20th, 2023 $105 strike put options yields more than 18% on an annualized basis, and 105 is a decent support zone, as you can see on the chart above. This is also a popular pivot area if you zoom out further: The stock has also been in a bullish uptrend, and the recent, flat price action is a solid consolidation that should be perfect for selling puts: But what about fundamentals? All of this means scant little if you're forced to buy a stock that will go down over the long term. Fortunately, AMD is growing its top-line sales and bottom-line profits at a steady pace on the back of increased demand for semiconductors: While the company is diluting shareholders somewhat, the valuation, at only 8x sales, seems reasonable when compared with peers and to the company's own multiple historically. Plus, the trade has a 76% chance of earning max profit by expiry. Overall, we think selling the October 20th, 2023 $105 strike put options is a great win-win trade for income-seeking traders. Cheers! Looking for more high-probability trade ideas? Follow us below. ⬇️⬇️
NASDAQ:AMDLong
by PropNotes
26
Centrica - bullish divergence*investment opportunity* A 90% correction since 2014 and following oversold condition there now exists an excellent opportunity to buy this stock. The 10-day chart above confirms a regular bullish divergence between price action and the oscillators + higher low in price action. This is the start of a trend reversal. Price action is now in the bullish half of the Bollinger band as the mouth is constricting, which suggests a big move is coming. On the fundamentals Centrica engages in the provision of energy and supply services. There is no end of ‘bad news’ stories on the business. Pay no attention. The only news you need is the headlines in the charts, and they look amazing. A buy above 42 is good. 1st target 115 2-month chart - broken RSI resistance following oversold condition: 3-month chart - bullish morning star + confirmation
LSE:CNALong
by without_worries
20
Pre-Earnings Run in $UPSTNASDAQ:UPST has been running up speculatively after completing its bottom. It has mostly retail groups and smaller funds holding so that is why the stock has up and down days in an irrational trend pattern often. HFTs are in the mix regularly inspiring the speculation. The company reports Monday of next week. Looks like Pro Traders used a swing trading earnings strategy and some took profits ahead of the report. The stock has a low percentage of the shares held by institutions, so emotional trading candlestick patterns are problematic at times. It's important to buy and sell with the Pro Trader patterns in speculative stocks.
NASDAQ:UPST
by MarthaStokesCMT-TechniTrader
7
PayPal 79% down from ATH!! Under massive discount??I do not do manual analysis on anything. Instead, I develop methods to do the analysis. This way, we can be free from bias, and we measure things objectively. Having said that, purely statistics based analysis does not take into consideration recent news events and other economical or political impacts on the company. I developed this method to measure the discounted price probability of stocks based on its historical values of fundamentals and prices. Here is a summary of what is happening with PayPal!! Price down 79% from peak. This is also 98% discount if you consider drawdown of prices from ATH Most of the fundamentals are almost at all-time high. Exception is cashflow - that is in the negative territory Profit and operating margins are down slightly compared to its ATH Returns in comparison to capital, earning and assets are near ATH Debts have significantly increased Though the algorithm says probability of being discounted is pretty high, it takes all aspects into consideration and gives equal weightage. Will the significant increase in debt play a major role in the reduction of value, considering the increasing interest rates?
NASDAQ:PYPL
by Trendoscope
22
Europe (VGK) slides right as folks head on holidayThe Vanguard FTSE Europe ETF (VGK) was an early-year relative winner as foreign equities generally outperformed the US stock market. Then came the March pullback which brought about a risk-off environment and flight to the dollar - both factor hurting relative returns of VGK. Even with a notable retreat in the greenback and a gradual shift favoring cyclical and small caps in late May through July, VGK did not perform all that well on a relative basis to the SPX. Nevertheless, the Financials, Industrials, and Health Care-heavy fund managed to claw its way toward 52-week highs by late last month. The first two trading sessions of August - a noted time when much of the continent's populous is on vacation - have featured a downside price action on high volume. Moreover, a bullish false breakdown in the dollar only adds to technical and intermarket headwinds for VGK here. I see support in the $59 to $60 zone while $64 is obvious resistance. A bigger Q3 pullback, always wont to occur, could lead to a target toward the mid- FWB:50S (that would be a material 14% correction).
AMEX:VGKShort
by mikezaccardi
8
Does weakness in Chinese stocks spell trouble for the U.S. ones?A while ago, we drew attention to the intriguing correlation between the Chinese and U.S. stock markets. In fact, we presumed that if the Chinese economy and stock market were doing well (following the reopening after Covid-19), it would be inherently positive for the U.S. stock market and could postpone a recession to later. From around October 2022, both indices were rising in tandem. However, in March 2023, the positive correlation between the two started to weaken, and the U.S. stock market kept rising while Chinese stocks began to move increasingly sideways, finding resistance above 20,000 HKD. We find this development interesting as specific U.S. stock titles are reaching highly overbought levels, and the general theme in the media continues to be that of “soft landing” and that we have nothing to worry about. Seemingly everyone seems to forget that regional banks started to implode in 1Q23, and without the FED stepping in and providing more liquidity to the market, the situation would have been much worse. Then, on top of that, the FED keeps hiking into a slowing economy with many subtle signs of a recession already presenting themselves. We believe that if the Chinese stock market continues to roll over, then it can potentially lead to the spillover effect. Illustration 1.01 Illustration 1.01 shows the correlation between the SPX and HSI (Hang Seng Index). It can be easily observed that both indices trended down from October 2021 until October 2022. After that, both indices trended together to the upside until late March 2023, when SPX kept increasing, but HSI began finding resistance above 20,000 HKD. Illustration 1.02 Illustration 1.02 displays the daily chart of HSI and the resistance area. Technical analysis gauge Daily time frame = Neutral Weekly time frame = Bullish *The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages. Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
SP:SPXShort
by Tradersweekly
51
Cisco Pulls Back After JumpingThe Dow Jones Industrial Average has been moving lately, and today we’ll consider index member Cisco Systems. The networking giant spent about a year trapped below the $52 area. That zone marked a top in April, June and early this month. However CSCO broke above it on July 19 and ran to a new 52-week high. It retreated on Friday to hold the earlier peak. Old resistance may have become new support. Second, the pullback brought CSCO back to its 21-day exponential moving average (EMA). The 8-day EMA remains also remains above the 21-day EMA. Those points may suggest its recent short-term uptrend remains in effect. Finally, the stock rallied after its last two earnings reports. Will that positive history provide a tailwind for the shares with the next set of numbers due on August 16? TradeStation has, for decades, advanced the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more. Important Information TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. TradeStation Crypto, Inc. offers to self-directed investors and traders cryptocurrency brokerage services. It is neither licensed with the SEC or the CFTC nor is it a Member of NFA. When applying for, or purchasing, accounts, subscriptions, products, and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means. This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates. Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: www.tradestation.com .
NASDAQ:CSCO
by TradeStation
8
EURUSD - Breaking Down Buying Opportunities for the Week AheadHere's a look at the FX:EURUSD & the potential buying opportunities that I have on my radar for the week ahead. More specifically what I'm looking at is a potential Bat Pattern with multiple points of confluence that can be used as a strictly in & out type of countertrend trade or an entry into a longer-term continuation setup depending on your big picture view. As always if you have any questions, comments or just want to share you views on the EURUSD please leave them below & please remember to hit that ROCKET SHIP button before you leave to show me some love. Akil
Long
by Akil_Stokes
51
As we approach new highs, what's the bear case?Historically, a rebound of this magnitude has almost always indicated that the bear market is over and that we've entered a new bull market. And there's plenty of reason to be optimistic right now. With the US dollar down, US manufacturing numbers have been coming in above expectations (PMI of 49 in July, vs. 46.7 estimate). Consumer confidence and home prices were also stronger than expected this week. The liquidity crisis for regional banks seems to have resolved itself, and the uptick in continuing jobless claims (USCJC) seems to have stabilized, at least for now. The ECRI weekly leading index is forecasting positive US growth. Yesterday, the Fed said it's no longer forecasting a recession. Preliminarily, it kinda seems like the magnitude of stimulus and interest rate hikes were in the right ballpark to actually stick a soft landing this cycle (with a big assist from the AI productivity boom). But as the market pushes toward new highs, let's consider what might be the bear case. Because markets love to surprise, and I do think there are some worrying signs. 1. Inflation could come roaring back, forcing the Fed to keep interest rates high. A few weeks ago, interest rate futures were forecasting a 99% probability that rates would be lower by this time next year. But now it's only 87%, with a 2% chance that rates will actually be higher next July. Why are rate futures getting more hawkish? Basically because housing costs have been slow to correct and commodities prices have been climbing since May, which points to the possibility that inflation may continue to run hot. Why might housing prices and commodities stay hot? Well, for housing, it's basically because there's a shortage . We've got more real estate agents than houses for sale, by a wide margin. I do think housing prices will gradually come down, but it may take quite a while to normalize without a supply-side fix. And for commodities? Well, there are basically two problems. First, geopolitics are extremely ugly right now. You've got active insurgencies in huge swaths of Africa and the Middle East, and you've got Russia threatening to blockade food shipments on the Black Sea. That all drives commodity prices up. And second, you've got a six-sigma temperature anomaly that's destroying crops. Global warming seems to be running ahead of forecasts, which raises the worrying possibility that we've hit some kind of climate change tipping point and the North Atlantic Current might collapse sooner rather than later. That would be not only very inflationary for food prices, but also very bearish for equities in Europe and the US. Something to keep an eye on, for sure. 2. Expectations may be too high, especially for tech. Investors have been throwing money at tech companies because of the AI boom, on the assumption that these companies will be the main beneficiaries of it. But the reality, in my opinion, is that AI greatly erodes the value of their intellectual properties. For instance, ChatGPT has dramatically reduced the cost for me spin up a competitor product or even an open-source version of any major enterprise SaaS. The big software firms are going to have to throw a lot of money and people at AI in order to keep their edge. So far, only Microsoft is doing a really good job. And what about semiconductors? The AI boom is good for semis, because all that AI requires a lot of GPUs. But you know what? With rapid advances in the field, the compute demands have come down a lot . I can train a LLaMa model on a Colab notebook now, which is insane. Meanwhile, there's a semiconductor inventory glut on a scale not seen since 2001. Chips have been an extremely good bet for decades, and investors have rightly thrown a lot of money at them. But it's possible that we may now be late-cycle for the industry. Overall, I think the expectations for the S&P 500, and especially for Big Tech, may just be too high. We've got P/E above 26 at a time when profit margins are in a slide. My models point to a P/E in the 21–23 range as more appropriate for the current rates of interest and inflation. So it may be that there's not much room left for multiple expansion to lift the market higher here, so productivity gains will have to do a lot of work. 3. Liquidity remains a concern. In addition to raising interest rates, the Fed is continuing to shrink its balance sheet. Liquidity from the Fed has driven a lot of the market gains over the last decade, so a shrinking balance sheet is a headwind for stocks. There's also some reason to think consumers and small businesses have some cash flow issues right now. Last month, the Fed published a report showing an unusually high level of commercial financial distress. Auto loan delinquencies also hit a high last month. As long as money and jobs don't get any tighter than they already are, we probably won't see anything break. But if inflation rises again and we see more interest rate hikes, then there may still be some systemic risk. Conclusion I'm definitely not betting on a major bear market here. But this close to a major resistance level, it's worth looking parking some money in cash or bonds or putting on a hedge. S&P 500 puts are somewhat cheap right now, so it's not a terrible time to buy protection. And long-term bonds are on the cheap end of the range they've been trading in since last November, so it's also not a terrible time to put on bonds. I'm basically just thinking in terms of modest rotation and rebalancing here.
SP:SPX
by ChristopherCarrollSmith
70
EUR/USD Short and NZD/CAD ShortEUR/USD Short • If price corrects and a larger one hour flag forms, then I'll be looking to get short with a risk entry within it. • If my entry requirements are not met then I will simply wait until another setup which meets my plan materialises. • If there's any ambiguity then I will not place a trade on this pair. NZD/CAD Short • If price pushes up to and ideally just above our area of value, then regardless of how it does so I'll be waiting for a convincing impulse back down followed by a tight flag and then I'll be looking to get short with either a reduced risk entry on the break of the flag or a risk entry within it. • If my entry requirements are not met then I will simply wait until another setup which meets my plan materialises. • If there's any ambiguity then I will not place a trade on this pair.
Short
by StewySongs
30
The Implications of Nasdaq 100 RebalancingCME: Micro Nasdaq 100 Futures ( CME_MINI:MNQ1! ), E-Mini S&P Technology Select Sector Futures ( CME_MINI:XAK1! ) The Nasdaq 100 index tracks the 100 largest non-financial stocks listed on the Nasdaq stock exchange. Since its inception over 38 years ago, it has become the world’s preeminent large-cap growth index. So far in 2023, Nasdaq 100 has surged 42%, far outpacing the 18.7% gain from the S&P 500 and the 6.4% return by the Dow Jones Industrial Average. This big rally has prompted the Nasdaq to implement an index "Special Rebalance". What’s going on here? Nasdaq-100: Market-cap weighted Index with a Twist In the world of stock market indices, the two most common construction methodologies are equal-weighted and market-cap-weighted. The Nasdaq 100 is market-cap weighted, meaning the weight of each component is based on its market cap as a percentage of the aggregate market cap of the index. The higher the market cap, the bigger the weight. Nasdaq performs regular quarterly weight adjustments in March, June, September, and December. To prevent the index from becoming too top-heavy and unbalanced, Nasdaq imposes weight limits in its Nasdaq Index Weight Adjustment Guidelines. • No security weight may exceed 14% of the index. • If the aggregate weight of the five largest market capitalizations is more than 40%, they will be adjusted to 38.5%. • No security outside the largest five market cap companies may have a final index weight exceeding 4.4%. The list below shows index weight as of June 30th, the last quarterly adjustment, and the most recent market cap as of July 21st, for the top ten companies in Nasdaq 100: • No. 1, Microsoft (MSFT): market cap $2,556bn, index weight 12.92% • No. 2, Apple (AAPL): $3,019bn (12.57%) • No. 3, Nvidia (NVDA): $1,094bn (6.94%) • No. 4, Amazon (AMZN): $1,334bn (6.85%) • No. 5, Tesla (TSLA): $830bn (4.25%) • No. 6, Meta (META): $756bn (4.22%) • No. 7, Alphabet Class A (GOOGL): $1,560bn (3.71%) • No. 8, Alphabet Class C (GOOGL): $1,599bn (3.64%) • No. 9, Broadcom (AVGO): $373bn (2.40%) • No. 10, PepsiCo (PEP): $263bn (1.70%) • Top-5: market cap $8,833bn, index weight: 43.53% • Top-10: market cap $13,384bn, index weight: 59.20% • Nasdaq 100 (^NDX): aggregate market cap $25,990bn The Top-5 has already breached the 40% mark and will be brought down to 38.5% in the “Special Rebalance” to address the concerns of over-concentration: “A Special Rebalance may be conducted at any time based on the weighting restrictions described in the Index Rebalance Procedure if it is determined to be necessary to maintain the integrity of the Index.” How will this Rebalancing Impact Investors? According to the Nasdaq, over $500 billion in exchange traded funds (ETF) are tied to the Nasdaq-100, including Invesco QQQ ETF, iShares Nasdaq-100 UCITS ETF and ProShares UltraPro QQQ, just to name a few. If each fund tracks the Nasdaq 100 closely and responds to the rebalancing immediately, the Top-5 stocks in the portfolio will be reduced by 5% (from 43.5% to 38.5%). This would create short-term selling pressure in tens of billions of dollars. To put the figures in context: although the Top-5 companies have an aggregate market cap of nearly $9 trillion, they have a modest daily float. Based on my calculation, the average daily transaction value over the past three months was only $77 billion, less than 1% of their market valuation, with 337 million shares changing hands. Leading up to the rebalancing, we are seeing larger trade volume and higher volatility: • On July 21st, Microsoft had a trade volume of 69.3 million shares, vs. its 3-month average volume of 29.3 million shares; • Nvidia: trade volume 96.2m vs. 3-mo average 49.3m • Alphabet: trade volume 55.5m vs. 3-mo average 26.4m • Amazon: trade volume 69.5m vs. 3-mo average 63.6m Since peaking at 15,932 on July 19th, Nasdaq 100 has trended down in the last three trading sessions, currently trading at 15,455 on the morning of July 24th. Arbitrage Opportunity between Technology Indexes The Nasdaq 100 rebalancing is a unique issue with the Nasdaq 100 index. It has nothing to do with the fundamentals of these companies and has no impact on other Tech sector stock indexes which also include the same component companies. The S&P Technology Select Sector (XAK) has over 90% correlation with Nasdaq 100 (MNQ) historically. The former includes Apple, Microsoft and Nvidia, but not Alphabet or Amazon. In the past five years, XAK outperformed MNQ by 40%. In the past five trading days, MNQ underperformed XAK by 1%, likely due to the impact of the Nasdaq-100 rebalancing. In the long run, Nasdaq 100 rebalance will dilute the impact of the largest stocks in the index. Strong growth in Big Tech will be fully represented in XAK but capped in MNQ. This, in my opinion, would result in a widening spread between XAK and MNQ. XAK futures contract is based on $100 x S&P Select Sector Technology Index. At 1,786.6, each XAK contract has a notional value of $178,660 on July 21st. CME requires an initial margin of $9,500. MNQ contract is based on $2 x Nasdaq 100 Index. At 15,555, each MNQ has a notional value of $31,110. CME requires an initial margin of $1,680. Based on the relative notional values, someone bullish on the spread could establish a trade with 1 long XAK and 6 short MNQ. Using the last five days as an example: • If XAK increases by 1%, the long end of the trade would show a gain of $1,787 (17.9 x 100). If, during the same period, MNQ is flat, the short end would have no gain or loss. This spread combination would have a net gain of $1,787. • Using initial margins of $19,580 as a cost base, this equates to a one-week return of +9.1%. For comparison, if a trader invests in a Nasdaq 100 ETF and the index gains 1%, the return would also be 1%. Trading in futures comes with a leverage that would supercharge the gain if you were on the right direction. The spread trade would loss money if MNQ has a stronger performance than XAK. 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:XAK1!Long
by JimHuangChicago
9
AUDNZD LONDON OPEN SHORT (SIGNALS)📉AUDNZD SELL 📉 💰Take Profit 1 - 1.0832 💰Take Profit 2 - 1.0782 💰Take Profit 3 - 1.0732 ❌ Stop loss - 1.1012 Here is my analysis of AUDNZD: The AUDNZD pair has been in a bearish trend for the past few weeks, and it is currently trading near the bottom of its range. The current spot rate is 1.0912, and a sell entry point of 1.0912 is just above the recent low of 1.0892. There are a few reasons why AUDNZD could continue to fall in the near term. First, the AUD is generally seen as a commodity currency, and it has been weakening against the NZD in recent weeks as commodity prices have fallen. Second, the Reserve Bank of Australia is expected to raise interest rates more slowly than the Reserve Bank of New Zealand, which could weaken the AUD against the NZD. Finally, the NZD has been supported by the recent decline in risk appetite. However, there are also some risks to consider before entering a trade on AUDNZD. The forex market is volatile, and there is always the risk of a reversal. Additionally, the economic outlook for Australia and New Zealand is uncertain, which could impact the price of AUDNZD. Overall, I think AUDNZD is a good pair to trade for those who are looking for a short-term bearish trend. However, it is important to remember that the forex market is volatile, and there is always the risk of a reversal. Here are some additional factors that you may want to consider before entering a trade on AUDNZD: The economic outlook for Australia and New Zealand. The level of volatility in the forex market. The price of commodities, such as oil and gold.
Short
by SMARTRISKMINDSET
30
Tesla's Q2 2023:Accelerating into the Future with Record RevenueIn the recently released Q2 2023 earnings report, Tesla Inc. presented a record quarter on multiple fronts, showcasing its resilience and innovation in a challenging macroeconomic environment. The electric vehicle and clean energy company reported a 9.6% operating margin, GAAP operating income of $2.4 billion, GAAP net income of $2.7 billion, and non-GAAP net income of $3.1 billion. Despite price reductions in Q1 and early Q2, Tesla's operating margin remained robust, reflecting the company's ongoing cost reduction efforts, successful production ramp-ups in Berlin and Texas, and strong performance in the Energy and Services & Other sectors. The company's cash and investments increased by $0.7 billion in Q2, reaching a total of $23.1 billion. Tesla's Cybertruck factory tooling is progressing as planned, with the company currently producing RC (release candidates) builds. The Model Y, one of Tesla's most popular models, became the best-selling vehicle globally in Q1, demonstrating the company's growing market dominance. The company's total automotive revenues reached $21,268 million, marking a year-over-year (YoY) increase of 46%. The Energy generation and storage sector also saw significant growth, with revenues of $1,509 million, a YoY increase of 74%. Services and other revenue rose by 47% YoY to $2,150 million. Overall, Tesla's total revenues for Q2 2023 were $24,927 million, a 47% YoY increase. In terms of production, Tesla manufactured 19,489 Model S/X vehicles and 460,211 Model 3/Y vehicles in Q2 2023, representing YoY increases of 19% and 90% respectively. The total deliveries of Model S/X were 19,225, a YoY increase of 19%. The total deliveries of Model 3/Y were 446,915, a YoY increase of 87%. Tesla's installed annual vehicle capacity continues to expand. In California, the capacity for Model S/X is 100,000, and for Model 3/Y it's 550,000. In Shanghai, the capacity for Model 3/Y is over 750,000. In Berlin, the capacity for Model Y is 375,000. In Texas, the capacity for Model Y is over 250,000. The company also highlighted its commitment to AI development, with the production of Dojo training computers commencing. This development is expected to satisfy Tesla's immense neural net training needs using in-house designed Dojo hardware, which will enable faster and cheaper neural net training. For new Model 3 or Y customers, Tesla launched the "Get To Know Your Tesla" experience. This initiative allows users to adjust their seats, mirrors, and steering wheel, set up the phone key, and learn about topics such as regenerative braking. In conclusion , Tesla's Q2 2023 shareholder deck paints a picture of a company that continues to innovate and grow despite external challenges. With a focus on cost reduction, new product development, investments in R&D, continuous product improvement, and the generation of free cash flow, Tesla is well-positioned for long-term success. Read more in the comment section...
NASDAQ:TSLALong
by financialflagship
42