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Inflation

Key Drivers of the Market - A Deep DiveHello everyone! Today we will talk about five different important concepts. Many things are happening in markets, so I will create similar reports to help people understand why things are how they are. This will be my first report, so it might be a bit harder to go through, especially because on Tradingview, I can't easily share economic data or random non-Tradingview charts, so I will try to make each concept as simple as possible. Positioning 1) Positioning in markets appears to be quite extreme. Looking at the CoT long/short data for hedge fund positioning, we can get a pretty good sense of whether speculators are long or short. Overall, the market remains short on stocks and bonds. Regarding bond data, it is possible that the positioning is like this for other reasons, which doesn't mean they are bullish. As contrarians, we usually want to go against most speculators, but sometimes the speculators take one position for reasons other than making a directional bet (maybe they are hedged). Another significant market to look at is the energy market, and more specifically, oil, which in my opinion, is very close to transitioning back into a bull market. I am expecting one more shakeout here, with a dip toward 55-60$. I think one more shakeout for oil to take out all the lows (hunt stop loss), and speculators will fully turn short. Speculators have been cutting their longs for a year and are almost about to turn short for the first time in many years. Inflation 2) Expected inflation in the next CPI print is around 3% YoY and 0.3% MoM, potentially influenced by recent commodity spikes. These short-lived spikes could affect June's print, as some food-related commodities had a little rally. I believe inflation could come back with a vengeance, as there are too many potential issues with producing several materials and products. These issues could be exacerbated due to deglobalization and climate change (not the climate getting hotter, but colder). Truflation shows 2.3% YoY inflation, inflation expectations are at 2.3%, and interest rates are between 3.7% and 5.25% across the yield curve. My main view is that inflation will trend lower for a little longer, and its downtrend could end with a deflationary spike, as current real rates are substantially positive. It's even possible that we will get negative CPI MoM prints in Q3-Q4, but inflationary pressures will probably resume once we are done with that. Many argue that core inflation is sticky and too high, and I believe it might stay elevated for a while, but eventually, I think it will start falling. My view on inflation mainly has to do with outright shortages and not with money printing. The current disinflationary trend seen across most countries will probably continue for a little longer as we haven't seen substantial money printing for a while, while interest rate hikes are starting to affect consumers negatively. The biggest issue I see is that commodity producers are struggling and face severe problems due to green policies, deglobalization, and climate change. Another important point is that OPEC+ is about to cut 1-2m barrels/day of production, which means oil could spike as demand remains relatively strong. One of the reasons I think the biggest inflationary threat comes from the supply side (goods/services) is that Japan has had lower inflation than the US, despite keeping rates at 0. China didn't raise rates either and has been pumping liquidity into the system, as well as cutting rates, and yet inflation there is almost 0%. It shows that inflation has come down independently, with markets slowly shorting through various imbalances, not because interest rates increased. At this stage, higher rates might actually have the opposite effect than the one intended. Why? Because of the massive debts at the government level, which are being inflated even further as governments borrow at higher rates. Housing 3) The housing market remains strong, and a deficit exists. More supply will be coming online over time, but there are no signs of weakness or that the supply won't be able to be absorbed by the market. Many people are still waiting for rates and prices to drop in order to buy a house, while those with a mortgage are not selling their houses because they don't want to get a more expensive loan. Therefore we essentially have a balance in the market, with new houses and defaults being absorbed by those with cash and those willing to get an expensive mortgage. Rents have not gone up YoY but seem to be about to trend higher again. As there is still a lot of cash in the market and the US government keeps spending, it's reasonable to expect rents to stay flat or slowly tick higher, even if interest rate hikes are starting to affect the economy. Some countries are really suffering from higher interest rates, as most people have variable-rate mortgages; however, the US is in a better situation as most had their mortgages fixed at low rates. So far, it looks like banks and central banks are taking a loss on all the mortgages issued or refinanced during 2020 and 2021, and this effect won't be reverted any time soon. GDP 4) Q1 GDP growth was revised higher at 2% (from 1.4%), showing resilience in the US economy amidst recession fears. Despite growth in the US markets, concerns over a recession remain. As the US government keeps spending at a high pace, a recession will probably be delayed; without that meaning, it will never arrive. Interest rates have been rising, and the Fed wants to hike rates once or twice again. The Fed will likely intervene to support the economy in 1-2 years. As the deficit grows and rates increase, within the next few years, the government will have absorbed all excess liquidity trapped in the RRP or banks. That means that the Fed will then be forced to start buying bonds. The Fed is currently losing over 50B annually because it has to pay high rates to those that deposit at the Fed, which is effectively direct money printing. With so much government debt, the Fed can't raise rates much higher without adding this inflationary component. Although unemployment and bankruptcies are trending higher, the market is showing resilience. As stated above, the US economy is the most resilient, while many other countries are suffering heavily. What has been very helpful is that so far, we had strong oil production despite the war in Ukraine, while the US was releasing a lot of barrels from SPR. This strengthened consumption and boosted the economy. One important data point that proves that the US hasn't been in a recession is that the Travel Numbers of people flying in the US are at ATHs. How could someone call for a recession with these numbers? It's possible that interest rate hikes and all the printing in the US, along with a strong dollar, helped the US consumer to stay in relatively good shape. How bad do bankruptcies and unemployment get, and when? I don't know. I believe that the yield curve will eventually be right, and we will get a recession, but it's hard to call for one. Although lots of data points to the US being in a recession or close to getting into one, we haven't had proper confirmation for a downturn. Maybe we have been in a mild recession, and that's why the market is rallying so much, as people feared something awful, and this hasn't played out. Stocks 5) Stocks seem to remain in a bull market. After hitting the targets that I mentioned in some of my previous ideas, they had a mini-correction. I never turned fully bearish, but I thought at once, the SPX got at 4450 and the NDX at 15200, the market might have topped. This hasn't played out, and I must admit that the market looks bullish here. I can't say anything with certainty yet, but I'd avoid shorting or being all out. There are still many signals that point to higher stock prices. Apple just had a massive breakout and looks strong. Now at a 3T valuation, which seems too much, but when someone thinks that Apple is one of those companies that are essentially powering a 500T financial system, along with its growth potential with AI, then 3T doesn't seem that much. Although stocks seem expensive relative to the current GDP, let's not forget that AI will boost global GDP massively over the next few years. That means that tech companies like Microsoft and Google will keep expanding. Also, let's not forget that unprofitable tech deflated last year and hasn't recovered yet, so a lot of garbage got washed out and isn't a drag on the market. Finally, many people are missing something important: leverage didn't fuel this rally. The market deleveraged massively in 2022 and is now free from excess leverage. If this rally was driven by leverage, it would be fragile, and a reversal could occur at any moment. Summary To sum things up and add a few final touches... The main things leading the market are: NDX is a monopoly, AI, stock buybacks, passive investing, and government spending. It's improbable that these factors will cease to exist, and things will turn ugly immediately after the best first half the Nasdaq 100 has ever had. Sentiment might be changing and leaning toward bullish, but I am not seeing anything that's seriously worth paying attention to. Sure, maybe we get another little correction, but nothing more than that. The market looks very strong. Some leading indicators even show that liquidity and financial conditions will improve from here. I believe that too many people are stuck looking at interest rates but forget how bad the government deficits are and that the only way to keep moving forward is to print more money and accelerate growth and consumption. The NDX (Nasdaq 100) has broken above its double top in Q1 2022 and could easily sweep its Q4 2021 double top next. The index is just 11% away from new ATHs, which it could achieve in 2023.
FX:NAS100Long
by BitcoinMacro
AUD/USD pares losses ahead of RBA rate decisionThe Australian dollar is showing some movement right off the bat on Monday. AUD/USD fell as much as 70 pips in the Asian session but has recovered most of those losses. In the European session, AUD/USD is trading at 0.6657 down 0.03%. The Reserve Bank of Australia meets on Tuesday, and it's a coin-toss as to whether the central bank will raise rates for a third straight time or will it take a pause. Traders have priced in a 52% chance of a pause, according to the ASX RBA rate tracker. Just one week ago, the odds of a pause were 70%, after May inflation declined more than expected. Headline CPI fell from 6.8% to 5.6%, its lowest level in 13 months. Core CPI eased to 6.1%, down from 6.7%. The split over what call the RBA will make on Tuesday is indicative of the case that can be made both for a hike and a pause. The drop in inflation is certainly welcome news, but the RBA wants inflation to fall faster, as it remains almost triple the target of 2%. Additional rate hikes would likely send inflation lower, but that would raise the risk of the economy tipping into a recession. The Australian economy has cooled down, but the labor market remains strong and consumer spending has been resilient, despite high inflation. Retail sales for May jumped 0.7% m/m, up from 0.0% in April and smashing the consensus of 0.1%. RBA members in favor of a hike can point to employment and retail sales data as evidence that the economy can withstand additional hikes. The RBA minutes, which can be considered a guide to its rate policy plans, might point to a pause at Tuesday's meeting. The April and May minutes were hawkish and the RBA raised rates after these releases. The June minutes were more dovish, sending the Australian dollar lower. Could that signal a pause? In the US, the week wrapped up with the PCE Price Index, the Fed's preferred inflation indicator. In June, the index rose 0.1% m/m, down from 0.4% in May. This indicates that the disinflation process continues and traders have raised the probability of a July hike to 88%, up from 74% a week ago, according to the CME FedWatch tool. 0.6659 is a weak resistance line. Above, there is resistance at 0.6722 0.6597 and 0.6534 are providing support
by OANDA
EUR/USD climbs as key US inflation gauge ticks lowerEUR/USD is trading at 1.0872 in the European session, up 0.07%. The euro is under pressure and is down close to 100 pips since Tuesday. Inflation in the eurozone continues to fall. Eurozone CPI is expected to fall to 5.5% in June, down from 6.1% in May and a notch below the consensus of 5.6%. Headline inflation has fallen to its lowest level since January 2022. The problem for the ECB is that Core CPI, which is a more reliable gauge of inflation trends, moved the wrong way. Core CPI ticked higher to 5.4%, up from 5.3% and below the consensus of 5.5%. These levels of core inflation are incompatible with a 2% inflation target and today's inflation report won't prevent the ECB from delivering a rate hike in July. The ECB may be forced to increase rates beyond the July meeting until there is evidence that core inflation has turned the corner and shows clear signs of deceleration in the second half of the year. Germany's inflation report was worse, as both headline and core inflation moved higher, as expected. Headline inflation rose to 6.4% in June, up from 6.1% in May, while the core rate climbed from 5.4% to 5.8%. Inflation had fallen over six straight months and the June numbers could be an anomaly, but as ECB President Lagarde stated earlier this week, the battle against inflation isn't over yet. US Core PCE Price Index, the Fed's favourite inflation gauge, eased lower in May. The index dipped to 4.6% y/y, down from 4.7% in April, which was also the consensus. On a monthly basis, the index fell to 0.1%, down from 0.4%. The decline in inflation hasn't had much effect on market rate pricing, with an 86% probability of a 25-bp rate hike, according to the CME FedWatch tool. The week wraps up with UoM Consumer Sentiment, which is expected to rise to 63.9 in June, up from 59.2 in May. EUR/USD continues to put pressure on resistance at 1.0916. This is followed by resistance at 1.0988 1.0822 and 1.0750 are providing support
by OANDA
USD/CAD pares gains, Canadian inflation easesThe Canadian dollar is flat on Friday, trading at 1.3258 in the European session. Canada releases GDP for May later on Friday. The consensus stands at 0.2% m/m, which translates into 2.4% annualized, a respectable gain. If the GDP report beats the consensus, the Canadian dollar could post gains. Canada's economy showed strength in the first quarter, with a gain of 3.1%. This was higher than expected and was one reason cited by the Bank of Canada in its surprise decision to raise rates earlier this month. I would expect that GDP growth will again be a key factor when the BoC makes its rate decision at the July 12th meeting. The BoC, like most other major central banks, has aggressively tackled high inflation by raising interest rates. The policy appears to be working, as headline inflation eased to 3.4% in May, down sharply from 4.4% in April. The core rate, which is comprised of three indicators, fell to an average of 3.8% in May, down from 4.2% a month earlier. The drop in inflation is certainly welcome news for the central bank, but the key question is whether inflation is falling fast enough for BoC policy makers. A third factor in the BoC's decision-making process will be employment. Canada's labour market has shown strong resilience in the face of rising interest rates, although the economy shed jobs in May, after eight straight months of gains. Another decline in new jobs could dampen the Bank's appetite for a rate hike in July. The US is coming off solid GDP and jobless claims data on Thursday and all eyes are on the Core PCE Price Index, the Fed's favourite inflation gauge. The index is expected to remain at 4.7% y/y, which would mean that inflation remains uncomfortably high compared to the target of 2%. We'll also get a look at UoM Consumer Sentiment, which is expected to rise to 63.9 in June, up from 59.2 in May. USD/CAD is putting pressure on resistance at 1.3254. Next, there is resistance at 1.3328 1.3175 and 1.3066 are providing support
by OANDA
2
Markets Awaiting the PCE and FOMC – Day 3S&P 500 INDEX MODEL TRADING PLANS for WED. 06/28 Our models indicate choppy trading with no directional momentum until PCE release later this week. Depending on the number, it may bring inflation and interest rates back onto the market radar, with downside pressure added on the markets, which could crescendo into the FOMC meeting next week. In our trading plans for Fri. 06/16, we wrote: "The spectacular bull run of the last few weeks fueled by speculation around the Fed policies and, possibly, an epic short squeeze, could be consolidating in the week ahead". It appears gaining traction with Powell's comments about inflation and interest rates since then. The index slightly consolidated downwards from 4409.59 from the close on Thursday, 06/15 to the close of 4381.89 Thursday, 06/22.  Our models indicated 4315-4325 as the next support level, which was tested within next few days and the market rebounded from there. 4400-4410 is the resistance level, below which the bias is choppy at best. Positional Trading Models: Our positional models went short on the break below 4350 on Friday, with a hard stop at 4406. For today, models indicate carrying the short, with the hard stop updated to 4416 and a take-profit instituted at 4325. If the short is closed out through one of these exits, models indicate staying flat until indicated otherwise. By definition, positional trading models may carry the positions overnight and over multiple days, and hence assume trading an index-tracking instrument that trades beyond the regular session, with the trailing stops - if any - being active in the overnight session. Aggressive/Intraday Models: Our aggressive, intraday models indicate the trading plans below for today. Aggressive, Intraday Trading Plans: For today, our aggressive intraday models indicate going long on a break above 4380, 4373, 4363, or 4351 with a 9-point trailing stop, and going short on a break below 4377, 4370, 4360, or 4348 with a 9-point trailing stop.  Models indicate no explicit exits for today. Models also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 11:01am EST or later. By definition the intraday models do not hold any positions overnight - the models exit any open position at the close of the last bar (3:59pm bar or 4:00pm bar, depending on your platform's bar timing convention). To avoid getting whipsawed, use at least a 5-minute closing or a higher time frame (a 1-minute if you know what you are doing) - depending on your risk tolerance and trading style - to determine the signals. (WHAT IS THE CREDIBILITY and the PERFORMANCE OF OUR MODEL TRADING PLANS over the LAST WEEK, LAST MONTH, LAST YEAR? Please check for yourself how our pre-published model trades have performed so far! Seeing is believing!)  NOTES - HOW TO INTERPRET/USE THESE TRADING PLANS: (i) The trading levels identified are derived from our A.I. Powered Quant Models. Depending on the market conditions, these may or may not correspond to any specific indicator(s). (ii) These trading plans may be used to trade in any instrument that tracks the S&P 500 Index (e.g., ETFs such as SPY, derivatives such as futures and options on futures, and SPX options), triggered by the price levels in the Index. The results of these indicated trades would vary widely depending on the timeframe you use (tick chart, 1 minute, or 5 minute, or 15 minute or 60 minute etc.), the quality of your broker's execution, any slippages, your trading commissions and many other factors. (iii) These are NOT trading recommendations for any individual(s) and may or may not be suitable to your own financial objectives and risk tolerance - USE these ONLY as educational tools to inform and educate your own trading decisions, at your own risk. #spx, #spx500, #spy, #sp500, #esmini, #indextrading, #daytrading, #models, #tradingplans, #outlook, #economy, #bear, #yields, #stocks, #futures, #inflation, #recession, #fomc, #fed, #fedspeak, #speech
SP:SPX
by TradersAIDotCom
USD/CAD pares gains, Canadian inflation easesThe Canadian dollar spiked and gained 50 points after Canada released the May inflation report but has pared these gains. USD/CAD is unchanged at 1.3158. Canada's inflation rate fell sharply in May to 3.4%, down from 4.4% in April. As expected, much of that decline was due to lower gasoline prices. Still, this is the lowest inflation rate since June 2021.The core rate, which is comprised of three indicators, fell to an average of 3.8% in May, down from 4.2% a month earlier. The decline should please policy makers at the Bank of Canada, as inflation slowly but surely moves closer to the 2% target. The BoC cited the surprise upswing in inflation in April as one reason for its decision to hike rates earlier this month. With headline and core inflation falling in May, will that be enough to prevent another rate increase in July? Not so fast. The BoC has said its rate decisions will be data-dependent, and there is the GDP on Friday and employment next week, both of which will factor in the rate decision. The US released a host of releases today, giving the markets plenty to digest. Durable Goods Orders jumped 1.7% in June, up from an upwardly revised 1.2% in May and crushing the consensus of -1%. The core rate rebounded with a 0.6% gain, up from -0.6% and above the consensus of -0.1%. Later today, the US publishes the Conference Board Consumer Confidence and New Home Sales. Wednesday is a light day on the data calendar, with the Fed will in the spotlight. Fed Chair Jerome Powell will participate in a "policy panel" at the ECB Banking Forum in Sintra, Portugal, and investors will be looking for some insights into Fed rate policy. As well, the Fed releases its annual "stress tests" for major lenders, which assess the ability of lenders to survive a severe economic crisis. The stress tests will attract more attention than in previous years, due to the recent banking crisis which saw Silicon Valley Bank and two other banks collapse. There is resistance at 1.3197 and 1.3254 1.3123 and 1.3066 are providing support
by OANDA
AUD/USD pushes higher, CPI nextThe Australian dollar is in positive territory on Tuesday. AUD/USD rose as high as 50 pips earlier but has pared these gains and is trading at 0.6685, up 0.16%. The Australian dollar is showing some life after last week's awful performance, in which it declined by 2.87%. On Wednesday, Australia releases the monthly inflation report for May. Inflation is expected to ease to 6.1% y/y, down from 6.8% in April. If the consensus is accurate, this would mark the lowest inflation level since March. The Reserve Bank will be keeping close tabs on the inflation release, especially core CPI, which is a more accurate gauge of inflation trends. The core rate fell from 6.9% to 6.5% in April, but that is incompatible with a 2% inflation target, and the RBA will need to see core inflation fall much more quickly before it can think about winding up the current rate-tightening cycle. The markets have priced in a rate pause from the Reserve Bank of Australia at 77%, and a significant drop in inflation on Wednesday should cement a pause at the July meeting. The RBA surprised the markets earlier this month when it raised rates by 25 basis points, bringing the cash rate to 4.35%. The minutes of the meeting indicated that the decision to hike was close, and a key factor in the decision was concern over persistently high inflation. The central bank is well aware of the pain inflicted on households and businesses due to rising rates, and a pause in rate hikes would provide some relief, as well as allow the RBA to monitor the effects of its rate policy. At the same time, the central bank has made it absolutely clear that its number one goal is curbing high inflation, which means Wednesday's inflation release could have a significant effect on the direction of the Australian dollar. AUD/USD put pressure on resistance at 0.6729 in the Asian session. Above, there is resistance at 0.6823 0.6598 and 0.6518 are providing support
by OANDA
Gold - War Breaking Out?Many would like to perceive the pause in interest rates by the US Federal Reserve as a bullish take for markets at large. However the forward direction by Powell signals towards the bigger picture; inflation cannot be stopped by the Fed. March 2022, shortly after the invasion of the Donbas region by Russia the Fed began significant hikes in the Discount rate. See comparaison to SPX. This has put pressure on domestic and international markets. As foreign central banks try to follow along with hikes to avoid capital outflows, they have not been able to keep up. The international value of the US Dollar has risen considerably since January 2021, the trend accelerating as flight to quality has driven capital towards the US in the face of war. See below US02-year and US10-year treasuries plotted on the same axis, compared to the US Dollar Index. During this time, the price of gold COMEX:GC1! has made a few rallies towards the 2011 high, relating to geopolitical and sovereign risk. This price level in gold could prove very significant moving forwards. The market has indicated towards a long-term trend. It should be noted, that entities involved in potential geopolitical conflicts will move assets accordingly in advance. It is inevitable that war will continue to escalate, and so long as it does inflation will persist across the globe. In spite of capital flows towards the United States, global scarcity driven by shortages, insurance rate increases, impaired logistics and corrupt governments will continue to erode the domestic value of the dollar. The inflation we have been experiencing is war inflation, and no central bank has the power to stop the reactionary shock in financial markets that occurs when capital must seek cover. There appears to be political turmoil in Russia, but the question unanswered is why? It must be understood, that there is a strong belief in Russia that Putin has been too restrained by only invading the Donbas region. What is being stoked by NATO, is an ethnic conflict. Subtle difference in language and religion separate two relatively new nations, Russia and Ukraine. Kyiv the home of the Russian Orthodox church, established in what was the capital of a greater empire, collapsing in the late 1800s. That is to say, the contested regions in this war are hotbeds for an ethnic conflict. Paramilitary groups in Russia and Ukraine (of which there are many) have quite a well known and gruesome history between them, despite receiving little attention since 2022. With neither government viewed at large as capable, there is a massive tailwind risk with the US' approach to funding. It seems well established by now there is nobody accountable for how the weapons and munitions being shipped to Ukraine are being handled, and Nazism is rampant in the army. In addition to repeated attempts on Putin's life, the US is now discussing giving Zelensky of Ukraine access to nuclear weapons. With a "coup" having now taken place, it must be clear that there is a quickly growing threat of war escalating quickly. No attempts at negotiation have been made by Ukraine, despite massive loss of life on both sides. Therein lies our why. Consider the paramilitary groups are now willing to march against Moscow, what prevents them from marching on Kyiv? The negotiation between them has been settled, a new leader appointed and separation from the Russia government is complete. The dogs of hell let loose. Gold, Silver COMEX:SI1! and mentioned in a previous post, Natural Gas NYMEX:NG1! , are all forming lows after making new major highs. Inflation will persist and push the nominal price of gold up, but capital flows will nullify that effect to NY COMEX gold prices, as AMEX:GLD follows. This market is pushing towards a significant breakout, and this will move the price as global markets respond by moving capital. Gold becomes a target for flight to quality at this time. Friday was an ideal major low, the market may continue to make minor lows but a sustained rally to 2000 and beyond should be considered a bullish sign.
AMEX:GLD
by FPS_Denny
We’ve been here before. 2000’s Nasdaq vs Today.The Nasdaq's formidable recovery from the October 2022 bottom resulted in an impressive 42% surge, a rare feat for a major index. However, as it grapples with resistance at the 15250 level this past week, we are compelled to question if this upward momentum is running out of steam. Notably, historical instances where the Relative Strength Index (RSI) soared past the 70 level have often been followed by a downward shift for the index. We diligently monitor the Nasdaq's ratio against other major indices to gauge its relative value. At its current level, the Nasdaq seems to be trading at a premium compared to several other major indices. When we consider this ratio, the Nasdaq appears to be near its all-time highs. In fact, it's trading close to or above the levels seen during the dot-com bubble of the 2000s in all comparisons. When juxtaposed with the S&P and Dow, we find that this level is not unprecedented; each time the ratio has previously reached this level, it was swiftly corrected. Drawing a parallel between the economic conditions of the 2000s and now, it seems that we are in familiar territory, or as they say, ‘we’ve been here before’. To illustrate the similarities, let's consider the dot-com peak in March 2000 as a reference point. The current economic indicators closely mirror those from the 2000s, as reflected in measures such as Dollar strength, inflation, unemployment, and interest rates. In particular, the US 2Y-10Y spread indicates an inversion of the yield curve that surpasses even the extent seen during the 2000s. Simultaneously, the other indicators nearly align with their respective levels from that period. This begs the question: What has been propelling the Nasdaq higher? Could it be the hype surrounding AI and technology, or is it the liquidity in the market? We posit that it's a combination of both factors, as the tech rally and increased reserve balance seem to coincide with the ratio’s upward movement. Although we don't foresee a tech bubble bursting as it did in the 2000s, there's undeniable enthusiasm for the Nasdaq. Given the current setup's striking resemblance to the 2000s, we can glean lessons from that period to position ourselves optimally. One potential strategy could be to short the Nasdaq 100 Futures on CME outright at the current level of 15086, with the take profit at 13900 and a stop loss at 15600. Alternatively, investors expressing a bearish view on the Nasdaq 100 ratio could consider shorting 2 Nasdaq 100 Futures and going long on 3 S&P500 Futures. In the second setup, the dollar value of the position is equal, as the contract value of the Nasdaq 100 Futures and the S&P500 Futures is approximately the same, at roughly 600,000 USD for the full-sized contract at the current price level for both index. The same setup can be replicated using the micro Nasdaq 100 and S&P500 futures at the same ratio, where the position value is now roughly 60,000 USD. For each 1 point move in the standard size E-MINI S&P 500 Futures contract, the equivalent value is 50 USD and 5 USD for the Micro contract. Similarly, each 1 point move in the standard-sized E-MINI Nasdaq 100 Futures contract equates to 20 USD, and 2 USD for the micro contract. Trading this spread could potentially benefit from a margin offset of up to 70%, meaning that the capital required to initiate this trade is significantly reduced. This setup could be particularly attractive for traders seeking to optimize their capital usage while gaining exposure to these major indices. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. 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: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: www.cmegroup.com www.cmegroup.com www.cmegroup.com www.cmegroup.com
NASDAQ:NDXShort
by inspirante
Virulent inflation raises pressure on the Bank of EnglandThe inflation battle is far from over in the UK. In fact, the nature of inflation is taking a new form as the root cause moves away from external to more domestically driven shocks. While the headline rate remained unchanged at 8.7%yoy in May, core inflation accelerated to 7.1% in May from 6.8% in April, marking the highest rate since March of 19922. In response the Bank of England (BOE) raised interest rates by a bumper 50Bps to a 15-year high. While the Federal Reserve (Fed) and the European Central Bank (ECB) have made progress on bringing down inflation, the BOE still has some ways to go. Current market pricing assumes the terminal policy rate will go to 6% by year end3. UK inflation proving to be virulent The UK has the most severe entrenched inflation problem across developed markets. The domestically driven increase of services prices advanced from 6.9% to 7.4%yoy in May4. As services are labour intensive, they are being impacted by strong wage gains. Employment growth has been stronger than projected underscoring continued robust demand for labour. This high demand caused the rise in weekly average earnings (ex-bonus) to 7.5% in April5, well above the BOE’s forecast. Brexit has been partly responsible for the rise in wages. Brexit reduced the mobility of European workers. The resulting lack of non-qualified workers has not yet been reabsorbed. The situation was clearly exacerbated during the Covid pandemic that left a large part of the workforce sick. The shortage of workers in the UK continues to weigh on the supply side and has been the key reason inflation has remained stubbornly high. The resilient gains in employment (up 1.2% in April 20236) have allowed UK households to continue spending on services. Thereby contributing to higher services inflation, prices for recreational and cultural goods and services rose by 6.8%yoy in May 20237. At the same time, due to the shift away from floating rate mortgages towards fixed rate products over the last decade, the pass through of higher rates is taking longer to feed through the economy, thereby enabling the consumer to appear more resilient. However, headwinds are appearing from higher mortgage rates, with at least 800,000 fixed mortgages due to move on to significantly higher rates in H2 20238. Rents have also been rising, at an annualised pace of 5.6% in May compared to 3.2% in 20229. This is likely to place further pressure on real disposable incomes and simultaneously fuel core inflation higher. The Institute for Fiscal Studies estimates that higher interest rates will cause the average mortgage holder to suffer an 8.3% fall in disposable income compared to a scenario where rates remained at March 2022 levels. For 1.4 million of those borrowers, disposable income will fall by more than 20%10. BOE guided dovish The BOE’s guidance implied that no further rate hikes should be needed bar evidence of more persistent inflationary pressures however the market ignored this. Money markets priced a terminal rate of 6.25% by February 202411. The BoE did not rule out further rate increases should the inflation data continue to be unfavourable. However, they did downplay the unexpected surge in core inflation in May owing to special contributing factors such as the sharp rise in vehicle excise duty and the erratic contribution of airfares and holiday packages. The BOE also highlighted that forward looking indicators are pointing to material falls in future wage inflation which could then lower the pressure on services prices. We share that view, as producer price inflation which tends to serve as a leading indicator for consumer price inflation, eased more than expected in May. The June composite Purchasing Managers Indices (PMI) dropped for a second month in June, showing price pressures easing across the board, suggesting the economy could be turning. Sterling Positive rate surprises are not always positive for the currency. The Pounds muted response (-0.17%)12 to the BOE meeting despite the hawkish surprise and its negative reaction (-0.21%)13 to the hawkish May inflation data suggest that the BOE is prepared to endure a deeper slowdown in order to bring inflation under control. As a growth sensitive currency this is likely to remain an important headwind for the Pound. Sources 1 Bloomberg as of 23 June 2023 2 Bank of England as of 22 June 2023 3 Bloomberg, as of 23 June 2023 4 Bank of England as of 21 June 2023 5 Office for National Statistics as of 31 May 2023 6 Office for National Statistics as of 31 May 2023 7 Bank of England as of 22 June 2023 8 Source: Bank of England, Bloomberg as of 22 June 2023 9 Office for National Statistics, as of 22 June 2023 10 Institute for Fiscal Studies as of 30 April 2023 11 Bloomberg as of 23 June 2023 12 Bloomberg GBP/USD as on 22 June 2023 13 Bloomberg GBP/USD as on 20 June 2023
ECONOMICS:GBINTR
by aneekaguptaWTE
EURGPB RISING PRICEEuro has been completely destroyed by GBP money market rates. As of now all expectations have been released and further hikes may be required. EURGBP has been trading in the same price for 3 weeks and is starting to turn the tide. The market seems bottomed out.. as long as UK inflation data and employment data does not show hotter than expected data, then EUR might have a rebound trade here. Give your opinion of EURGBP in the comments below. Thank you for your attention.
Long
by tsmarts
QQQ Outlook 0626-30/2023Technical Analysis: Last week’s price action put NASDAQ:QQQ back inside the bullish channel we’ve been watching since March. We should see come corrective price action this week before tech runs higher. Bulls will look to see if we can stay above last week’s lows at 360. It is crucial bulls hold this level or we could see the daily fair value gap that could be filled below at 357.66. Bears will want to see a breakdown under the daily fair value gap, where we could test the strong monthly level at 354.43. If we lose the levels above, we can look for a test of the lower trendline in the upcoming weeks, and possibly a large gap to fill to the downside from 336.67-332.91. Inside this gap is the 50SMA and the 61.8% retrace at 334.00. Upside Targets: 364.57 → 370.10 → 373.83 → 380.76 → 386.28 Downside Targets: 360.00 → 358.97 → 357.66 → 354.43 → 352.46
NASDAQ:QQQ
by peterjames_6
Trading Plans for FRI. 06/23 - Bull Run Consolidation, ContinuedS&P 500 INDEX MODEL TRADING PLANS for FRI. 06/23 In our trading plans for Fri. 06/16, we wrote: "The spectacular bull run of the last few weeks fueled by speculation around the Fed policies and, possibly, an epic short squeeze, could be consolidating in the week ahead". This has played out as anticipated with yesterday's consolidation. It appears gaining traction with Powell's comments about inflation and interest rates this morning. The index slightly consolidated downwards from 4409.59 from the close on Thursday, 06/15 to the close of 4381.89 yesterday, Thursday, 06/22.  Our models indicate 4315-4325 as the next support level, which might be tested in the coming days. The potential bull trap cautioned about by our models continues to be in play. Those bulls who must have noted our models' trading plans and took some money off the table would have saved themselves some heartache. Bears should be nimble with their shorts. It is a bull market until it is broken - currently, this bull run is not broken, yet. Positional Trading Models: Our positional models indicate going short on a break below 4350, with a hard stop at 4406, effective from 11:00am EST today. By definition, positional trading models may carry the positions overnight and over multiple days, and hence assume trading an instrument that trades beyond the regular session, with the trailing stops - if any - being active in the overnight session. Aggressive/Intraday Models: Our aggressive, intraday models indicate the trading plans below for today. Aggressive, Intraday Trading Plans: For today, our aggressive intraday models indicate going long on a break above 4393, 4375, 4366, 4352, or 4341 with an 8-point trailing stop, and going short on a break below 4390, 4363, 4349, or 4338 with a 9-point trailing stop.  Models indicate explicit long exits on a break below 4373. Models also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 11:01am ET or later. By definition the intraday models do not hold any positions overnight - the models exit any open position at the close of the last bar (3:59pm bar or 4:00pm bar, depending on your platform's bar timing convention). To avoid getting whipsawed, use at least a 5-minute closing or a higher time frame (a 1-minute if you know what you are doing) - depending on your risk tolerance and trading style - to determine the signals. (WHAT IS THE CREDIBILITY and the PERFORMANCE OF OUR MODEL TRADING PLANS over the LAST WEEK, LAST MONTH, LAST YEAR? Please check for yourself how our pre-published model trades have performed so far! Seeing is believing!)  NOTES - HOW TO INTERPRET/USE THESE TRADING PLANS: (i) The trading levels identified are derived from our A.I. Powered Quant Models. Depending on the market conditions, these may or may not correspond to any specific indicator(s). (ii) These trading plans may be used to trade in any instrument that tracks the S&P 500 Index (e.g., ETFs such as SPY, derivatives such as futures and options on futures, and SPX options), triggered by the price levels in the Index. The results of these indicated trades would vary widely depending on the timeframe you use (tick chart, 1 minute, or 5 minute, or 15 minute or 60 minute etc.), the quality of your broker's execution, any slippages, your trading commissions and many other factors. (iii) These are NOT trading recommendations for any individual(s) and may or may not be suitable to your own financial objectives and risk tolerance - USE these ONLY as educational tools to inform and educate your own trading decisions, at your own risk. #spx, #spx500, #spy, #sp500, #esmini, #indextrading, #daytrading, #models, #tradingplans, #outlook, #economy, #bear, #yields, #stocks, #futures, #inflation, #recession, #fomc, #fed, #fedspeak, #softlanding, #hawkishpause, #pause
SP:SPX
by TradersAIDotCom
Gold:the monetary commodity’s fate in the hands of central banksGold is arguably the most sensitive commodity to monetary policy. The metal operates more like a pseudo-currency than a regular commodity (a regular commodity’s price is driven by the balance of supply and demand, gold is driven by many of the macro determinants of currencies). After hiking rates every meeting since February 2022, the Federal Reserve (Fed) took a pause in June 2023. The central bank has lifted the upper bound of Fed Fund target rates from 0.25% to 5.25% over that timeframe, marking one of the most rapid rate hiking cycles in history. At times, the Fed was hiking in 0.75% clips. Rising interest rates were an extreme headwind for gold for most of this period. Can gold investors breathe a sigh of relief now? Is this a temporary pause, or a halt on rate hikes? Well, if Fed Fund futures are to believed, there may be one more rate hike by September 2023. If the participants of the Federal Open Market Committee (FOMC) are to be believed, there could be several more rate hikes (with the median expectation of these participants pointing to a terminal midpoint rate of 5.625%, that is, an upper bound of 5.75%). Professional economists1 seem less sure of such decisive action, with the median looking for no change in rates this year (and cuts commencing in Q1 2024). Senior Economist to WisdomTree, Jeremy Siegel, believes the Fed is done hiking and that alternative inflation metrics, which incorporate real time housing inputs, show inflation running at 1.4% instead of the official 4.1% in May 20232. Market inflation expectations are not falling away as fast as we would expect. Judging by the 5yr5yr swaps, longer-term market inflation expectations are actually rising modestly. Higher inflation tends to be gold-price supportive (other things being equal). After hitting an all-time high in 2022, central bank demand for gold has maintained strong momentum. Official sector gold buying in Q1 2023 was the largest on record for the first quarter (albeit lower than Q3 2022 and Q4 2022). A YouGov poll, sponsored by the World Gold Council3 , showed that developing market central banks are expecting to increase their gold reserve holdings and decrease their US dollar reserve holdings. With a lack of forceful stimulus from the Chinese government, and still elevated gold prices in Renminbi terms, we expect a slowing of retail demand in China. In fact, Shanghai premiums over the London Bullion Market Association (LBMA) price slowed in May and remain low in June. Looking to WisdomTree’s gold price model, we can see that bond headwinds have clearly fallen away and US dollar depreciation (relative to a year ago) is offering gold some support rather than dragging prices lower. However, investor sentiment towards the metal has moderated since March 2023, when the collapse of Silicon Valley Bank (SVB) and the shotgun marriage between UBS and Credit Suisse Banks was announced. With the passing of the US debt ceiling debacle, there aren’t any specific risks driving gold demand higher. However, general recession fears and the potential for unspecified financial sector hiccups are likely to keep gold demand moderately high as the metal serves well as a strategic asset in times of uncertainty. Source: 1 Bloomberg Survey of Professional Economists, June 2023. 2 The alternative measure calculates shelter inflation using Case Shiller Housing and Zillow rent which annualise at 0.5% instead of the 8% that is biasing the Bureau of Labor Statistics CPI higher. 3 2023 Central Bank Gold Reserves Survey, May 2023.
COMEX:GC1!
by aneekaguptaWTE
1
Is It Time to Follow the Oracle's Lead?You may have heard of a certain Warren Buffett, and it seems like he might be onto something... Buffett, known as the "Oracle of Omaha," has demonstrated remarkable investment timing, or perhaps an innate ability to steer investment flows. This was clearly illustrated by his investment in Japan, which triggered a rally in the Nikkei to decade-long highs. While that window may have closed, Buffett has been discreetly bolstering his stake in another entity - Occidental Petroleum (OXY). If we scrutinize the timing of his purchases, it's apparent that Buffett likely had a price floor in mind. Intriguingly, his first purchase occurred when Crude was trading at a 15-year high! This leads us to examine Oil, which has been trading nearly 40% lower since mid-2022. Since our last discussion about oil, the Strategic Petroleum Reserve (SPR) has been further depleted, reaching its lowest level since 1983. The result of this drawdown is a diminished impact on energy costs as evidenced by the energy inflation index, which has not only passed its peak but has now turned negative. Interestingly, the Canadian dollar and the Norwegian Krone, currencies of major oil-exporting countries, have been outpacing the commodity typically correlated with them, Crude Oil. On the whole, it seems the energy commodity sector may have bottomed out, with all types of Oil and natural gas trading on an upward trajectory. In consideration of these factors, the outlook for oil leans towards the bullish side. The scarcity of oil in the SPR and the absence of energy inflation as a significant contributor to overall CPI make it unlikely for the U.S. to release more oil to depress energy prices. Coupled with the buoyant trend in the energy commodity space and the recent outperformance of major oil-exporting countries' currencies, it appears to be an opportune moment to consider a long position on oil. At the current price level of 72.33, risk managed trade points to setting the stops at the previous support of 66 and take profit level at 85. Each Crude Oil Future contract is equal to 1000 barrels of crude oil. Each 0.01 point increment in Crude Oil Futures is equal to 10 USD . The same view can also be expressed with greater precision using the Micro WTI Crude Oil, where each Micro contract is equal to 100 barrels of crude oil and each 0.01 point increment is equal to 1 USD. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. 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: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: www.cmegroup.com www.cmegroup.com www.eia.gov tradingeconomics.com
NYMEX:CL1!Long
by inspirante
GBP/USD dips after inflation jumps, BoE up nextThe British pound has edged lower on Wednesday. GBP is trading at 1.2724 in Europe, down 0.3%. GBP/USD spiked after today's inflation release but in currently in negative territory. The UK released the May inflation report today, and the results were a major disappointment, to put it mildly. With inflation falling for two straight months, there were hopes that the Bank of England's rate policy was slowly working and the downtrend would continue. The monthly readings showed that headline and core CPI eased, but the annualized readings were worse than expected. Headline CPI remained at 8.7%, above the consensus of 8.4%. Core CPI rose from 6.8% to 7.1%, above the consensus of 6.8%, the highest level since March 1992. The core rate, which excludes food and energy prices, is considered more important, and the 0.3% gain is a huge disappointment for the BoE. The Bank of England won't have much time to mull over the inflation figures, as it announces its rate decision on Thursday. There's little doubt that the BoE will have to raise rates for a 13th consecutive time, and today's inflation numbers mean there is a strong possibility of an oversize 0.50% increase. The BoE finds itself between a rock and a hard place, as it struggles to contain inflation without causing a recession. The resilient labor market has complicated the BoE's attempts to cool the economy, and the markets are projecting that the Bank Rate, currently at 4.5%, won't peak until 6%. High inflation has already caused a cost-of-living crisis, and more rate hikes will only exacerbate the pain. Fed Chair Powell begins two days of testimony before Congress on Wednesday. Lawmakers are expected to grill Powell about the Fed's rate policy. The Fed paused at this month's meeting but is expected to raise rates at the July meeting. Powell has said that he can pull off a soft landing that will avoid a recession and jump in unemployment, but he'll likely have to answer pointed questions from lawmakers who are concerned that higher rates will damage the economy. 1.2719 remains under pressure in support. Next, there is support at 1.2645 There is resistance at 1.2848 and 1.2950
by OANDA
GBP/USD lower ahead of UK inflationThe British pound is lower on Tuesday. In the European session, GBP/USD is trading at 1.2739, down 0.41%. The UK releases the May inflation report on Wednesday and BoE policy makers will be hoping that inflation continues to trend lower. Inflation dropped in April to 8.7%, decelerating for a second straight month. The consensus stands at 8.4%, and the good news is that those awful readings above 10% appear to be over. On a monthly basis, inflation is expected to fall to 0.5% in May, down from 1.2% in April. Inflation appears to have peaked and is heading lower, but nobody at the Bank of England is smiling. The UK is expected to have one of the highest inflation rates in the G-20 this year at 6.9% and the BoE's 2% target is miles away. Finance Minister Sunak has set a goal of lowering inflation to 5% by the end of the year, which seems feasible if inflation continues to downtrend in the coming months. The BoE will be in the spotlight on Thursday when it makes its rate announcement. The markets have priced in a 25-basis point hike at 70%, with a 30% chance of an oversize 50-bp increase. If inflation falls as expected to 8.4% or lower, the MPC should be able to proceed with the 25-bp hike, although central banks have a tendency of surprising the money markets. In the US, it's an unusually light data calendar this week. There are no tier-1 releases on Tuesday, and the markets are looking ahead to Wednesday, with Jerome Powell testifying before the House Financial Services Committee. Powell will have to clarify to lawmakers the Fed's interest rate path, as the Fed paused last week after ten straight hikes but expects to renew hiking in July. 1.2719 is under pressure in support. Next, there is support at 1.2589 There is resistance at 1.2848 and 1.2950
by OANDA
AUD/USD drifting lower ahead of RBA minutesThe Australian dollar has started the week with losses. AUD/USD is trading at 0.6848, down 0.39%. The Australian dollar gained 1.95% last week and has soared 5.2% in the month of June. The Reserve Bank of Australia releases the minutes of the June meeting on Tuesday. At the meeting, the Bank decided to raise rates by 0.25%, bringing the benchmark rate to 4.10%. This surprised the markets, which had expected the central bank to pause. Governor Lowe continued his hawkish stance after the decision, defending the interest rate as necessary since "upside risks to the inflation outlook have increased". Lowe has his hands full with sticky inflation, which rose in April from 6.3% to 6.8% y/y, above the consensus of 6.4%. The core rate fell from 6.9% to 6.5%, but this is much too high for the RBA, which has a target of 2%. The RBA has projected that inflation will not fall to 2% until mid-2025, leaving little doubt that the current rate-hike cycle is not close to wrapping up. The minutes should provide insights about the rate hike and what the central bank has planned moving forward. The RBA meets next on July 4th. The Fed is also very concerned with inflation but took a different approach, as it paused at last week's meeting after ten consecutive hikes. Fed policymakers got some good news on Friday, as UoM inflation expectations eased to 3.3% in June, down sharply from 4.2% in May and lower than the 4.1% consensus. Inflation expectations haven’t been this low since March 2021 and this is another indication that inflation is heading lower. The UoM Consumer Sentiment report climbed from 59.2 to 63.9, due to lower inflation expectations as well as the resolution of the banking crisis, according to the report. AUD /USD tested support at 0.6836 earlier. Next, there is support at 0.6729 0.6940 and 0.7004 are the next resistance lines
by OANDA
S&P 500 Daily Chart Analysis For Week of June 16, 2023Technical Analysis and Outlook: The Reignited Rally continues to move forward this week, hitting our target Outer Index Rally 4412 and, by doing so, completing Inner Index Rally 4444. This suggests a couple of trading scenarios: The unconfirmed completion by Trade Selecter, the market severity will pull back to Mean Sup 4365, followed by a solid bounce to retest the developed and confirmed by Trade Selecter Key Res 4425. The second scenario will display Spooz regrouping within the vicinity of developing Key Res and penetrating higher by targeting Outer Index Rally 4480. Trade Selecter will closely monitor any updates and share any valid confirmation with you.  (Please note that there will be no Daily Chart Analysis for the week of June 23. The next update will be on June 30). 
SP:SPX
by TradeSelecter