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Inflation

Very Bullish on SilverTwo years ago, I made a video on my YouTube channel, explaining why Silver OANDA:XAGUSD is forming a strong bullish reversal pattern. Currently, we're past Wave 1 and almost at the end of Wave 2 in the new bullish cycle. Now, apparently, there's a belief that silver isn't a store of value anymore; that cryptocurrencies have already replaced gold and silver for that matter; that silver is a consumption commodity like copper and lithium, so if we need more silver to make more electronic products, we can just recycle what we've already mined; that the major retail consumer of silver is someone who goes cheap on platinum or gold jewellery; the list goes on... In the video I linked above, I explained why I think silver is about to have a bull run, along with a general hands-on walk-through of my trading/investment analysis. The only development on top of what I said in the video is the rising demand for silver in the production of photovoltaics, which has more than doubled since 2012 in the quest to ditch fossil fuels. The total demand for silver in 2022 is at an all-time-high since 2012, at 1,101.8 million ounces, 71.5 million ounces short of the total supply. Now, for posterity, I placed a long order with Stop Loss at around $11 and profit target around $65. This is 2.618 of Wave 1, which is quite conservative, given that this bull cycle is not just fuelled by the hyper-inflation of the denominator (i.e., USD), but also the expected surge in demand for silver for industrial applications in the coming years. The aforementioned denominator is an interesting case. Across markets, the discussion revolves around the crash of Bitcoin, the crash of stocks, the crash of gold and silver, and so on. The question that should be asked is what are all these assets crashing against: a hyper-inflated, artificially maintained denominator, whose artificial maintenance has been successfully carried out so far, but I don't think is sustainable in the long run. When it is no longer feasible for the custodian of the denominator to artificially maintain the price of the asset, when other assets are allowed to be valued against the real value of the USD, the astronomical inflation in the price of commodities and BitCoin would be proportional to the astronomical inflation of the USD in the last decade. Speaking of artificiality, TVC:DXY is a prime example. I see many investors look at the TVC:DXY and claim that the Dixie has always been strong, that it's the strength of the USD that keeps gold and silver prices down. Well, TVC:DXY is the relative strength of a hyper-inflationary asset against a basket of other hyper-inflationary assets (EUR, GBP, CAD, etc.). A strong dollar doesn't mean a strong dollar against assets with limited or capped supply (as in BitCoin ). All it means is that the hyper-inflationary asset in question isn't as hyper-inflationary as its lavish siblings. Best, Davood.
FX_IDC:XAGUSDLong
by DavoodWadi
Powell Time The past two weeks have been relatively calm as Bitcoin traded in the $16,000 to $17,500 range. It appeared that the contagion effects from the FTX collapse were slowly starting to fade, however in the past few days more information has surfaced surrounding Grayscale Bitcoin Trust (GBTC) and its potential insolvency. On Wednesday GBTC closed down -7.42%, giving prospective buyers a record 43% discount on Bitcoin. Many are hypothesising that a large institutional investor is dumping shares of the ETF in order to patch a hole in their balance sheet and maintain solvency. After all, it has since been revealed that many institutional players, such as Grayscale’s parent company (Digital Currency Group), had significant exposure to FTX and its associated companies. You would assume that investors would flock to buy at these discounted levels, however Grayscale is currently being sued by hedge fund Fir Tree in order to investigate potential mismanagement and conflicts of interest. It’s likely that many investors will wait for the outcome of this litigation before making a definitive decision. In other news, Jerome Powell, chair of the Federal Reserve (Fed), gave a speech on 30th of November where he detailed that a 50 bps rate hike was coming. Interestingly, this immediately caused a surge in risk assets and equities, the opposite from what macroeconomic theory would predict. This is likely due to markets reacting to the higher probability of a “pause” (a period where a central bank holds rates constant to assess if and how its policies are working) based on Powell indicating that future rate hikes might be less significant. However, it appears that the market overreacted to this news as the gain in equities following the speech has since been wiped out as the S&P500 has corrected to the levels it was at prior to the speech. From a technical perspective, bears will be hoping for a break below the $15,500 support level which would likely bring new market lows not seen since 2020. This support has held since our last market update however it is yet to be retested. Additionally, since our last update where the MACD initially crossed its signal line, the short term upwards momentum played out and the histogram has remained bullish. Another important point to note is that the Money Flow Index (MFI) has been trending upwards since it bounced off oversold levels in early November. If this trend continues to play out and the oscillator moves towards 80, traders may look to exit long positions and start to look for short entries. The two key events to watch in the coming weeks are the December 13th announcement on U.S CPI inflation and the Federal Reserve's December 14th announcement on rates. If inflation comes in soft, it’s likely that risk assets and equities markets will see at least a short term increase in bullish momentum. Inflation figures will likely dictate the Fed's decision on rates the following day and will determine if they stick to the 50 bps hike that Powell hinted at. These two events will have a major bearing on short run market direction. However, if GBTC continues to capitulate and the fund does indeed unwind, the short term future will be bleak for crypto.
by Coinrule
1
GBP/USD edges higher, US PPI loomsThe British pound has posted slight gains today. In the European session, GBP/USD is trading at 1.2257, up 0.32%. After a rather uneventful week for the US dollar, next week could be marked by plenty of action, with a host of key releases on both sides of the pond. The BoE and Federal Reserve are expected to deliver 50 bp hikes, and we'll get a look at the latest inflation data from both the UK and the US. Like the Federal Reserve, the BoE has also circled inflation as public enemy number one, but Governor Bailey doesn't have the luxury of a strong economy to work with. With GDP in negative territory and inflation at a staggering 11.1%, the economy may already be experiencing stagflation, but Bailey can ill afford to allow inflation expectations to become more entrenched. Winter is likely to be a season of discontent, with railroad and other public workers threatening to go on strike, as the cost-of-living crisis has hit households hard. The Federal Reserve will be keeping a close eye on the US inflation report, which will be released just one day before the Fed's policy meeting. Inflation has eased over the past several months, but the Fed has been very cautious and is still reluctant to declare that inflation has peaked. The Fed has not looked kindly on market exuberance triggered by soft inflation reports, and paraded a stream of Fed members to remind investors that inflation remains unacceptably high and the fight to curb inflation remains far from over. The markets will get a look at US inflation data later today, with the release of the Producer Price Index (PPI). The index is expected to drop to 7.4%, down from 8.0%. A decline in PPI would reinforce expectations that we'll see a drop in CPI as well next week. 1.2169 and 1.2027 are the next support levels GBP/USD is testing support at 1.2169. Below, there is support at 1.2027
by OANDA
1
How To Prepare For Rising PricesA blog article discussing how inflation is impacting family budgets, what it means for household budgets in the US, and some basic strategies people can use to help manage by RobinhoodFX Robinhoodfx. Intro In recent months, we've seen inflationary pressures building in the U.S. economy. Prices for key commodities like crude oil and agricultural products are rising, and wages are starting to creep up as well. All of this points to one thing: higher prices for consumers in the months ahead. How can you prepare for rising prices? Here are a few tips: Know where your money is going. Track your spending for a month or two so you have a good understanding of where your money goes each month. This will help you identify areas where you can cut back if necessary. Make a budget and stick to it. Once you know where your money is going, it's time to create a budget that ensures you're spending wisely. Be realistic in your assumptions about inflation and make sure your budget can withstand a bit of financial volatility. Invest in yourself. Inflation erodes the value of assets like cash and bonds, so it's important to invest in assets that hold their value or even increase in value over time. One great way to do this is to invest in yourself through education or job training that will make you more valuable in the workforce. Stay disciplined with your spending. When prices start rising, it's tempting to spend more freely since "everything is going up." But if you want to stay ahead of inflation, it's important to keep your spending under control and focus on essential purchases only What is Inflation? Inflation is the rate of increase in the price of goods and services over time. It is measured as the percentage change in the consumer price index (CPI) or producer price index (PPI). Inflation can be caused by a variety of factors, including excess money supply, government spending, and global factors such as commodity prices. Excess money supply is when there is more money in circulation than there are goods and services to purchase. This can happen when the Federal Reserve prints more money or banks lend out more money than they have on deposit. Government spending can also cause inflation if it exceeds tax revenue. When the government spends more than it takes in through taxes, it has to print more money to cover the deficit. This increases the money supply and can lead to inflation. Global factors such as commodity prices can also affect inflation. For example, if the price of oil rises, this will likely lead to higher prices for gas and other products that use oil as an input. How Do Inflation Rates Affect Prices? Inflation rates can have a significant effect on prices, particularly over the long term. When inflation is high, prices tend to rise, and when inflation is low, prices tend to fall. In general, higher inflation rates mean that consumers will pay more for goods and services, while lower inflation rates mean that they will pay less. How Does Inflation Affect Prices? Inflation is the rate at which the prices of goods and services in an economy increase over time. The main drivers of inflation are changes in the demand for goods and services, and changes in the supply of money. When there is more money chasing after fewer goods and services, prices go up. The opposite happens when there is less money chasing after more goods and services; prices go down. What Does This Mean for Consumers? For consumers, inflation can have both positive and negative effects. On the one hand, rising prices can erode the purchasing power of their incomes, making it difficult to afford basic necessities or maintain their standard of living. On the other hand, inflation can be beneficial if it leads to higher wages and salaries; as long as wages grow at a faster rate than prices, consumers will be better off. What Does This Mean for Investors? Investors need to be aware of how changes in inflation might affect their portfolios. For example, investments in Treasury bonds become less attractive when inflation is high because the fixed payments on these bonds lose value relative to other investments that offer higher Rising Costs: Why are They Happening Now? There are a number of factors that are causing prices to rise in the United States. The most significant factor is the increasing cost of labor. Wages have been rising steadily for the past few years, and this is putting pressure on businesses to raise prices in order to cover their increased costs. Other factors that are contributing to rising prices include the increasing cost of raw materials, such as oil and gas, as well as transportation costs. These costs are being passed on to consumers in the form of higher prices for goods and services. inflation is also playing a role in driving up prices. The Federal Reserve has been keeping interest rates low in an effort to stimulate economic growth, but this has led to higher inflationary pressures. As prices start to increase, Americans will have less purchasing power and will be forced to cut back on spending. The rising costs of health care are also putting upward pressure on prices. The Affordable Care Act has led to increased demand for health care services, which has driven up prices. In addition, the aging population is requiring more medical care, which is also contributing to higher costs. All of these factors are leading to rising prices across the economy. American consumers will need to brace themselves for higher prices for goods and services in the months and years ahead. How Everyday Consumers Can Best Prepare for the Potential Impact There are a few things that everyday consumers can do to best prepare for the potential impact of rising prices in the U.S. First, it’s important to be aware of what’s happening in the economy and how it might affect your finances. Second, make sure you have an emergency fund in place in case prices go up unexpectedly or you lose your job. Third, consider ways to cut costs so you can save money. Finally, invest in yourself and your career so you’re prepared for any changes that might come. The Ramifications of Higher Unemployment and Lower Employment Rates Unemployment and lower employment rates have a number of ramifications. Perhaps the most obvious is that fewer people are employed and earning an income. This can lead to less spending, which can in turn lead to less economic activity and slower growth. Additionally, when people are unemployed or underemployed, they may have difficulty meeting their basic needs, which can lead to increased stress and anxiety levels. This can also result in social problems such as crime. Additionally, unemployment can have a ripple effect on businesses, as they may have to lay off workers or cut back on hours/wages. Lastly, high unemployment rates can lead to political instability. Solutions to Fighting Inflation Inflation is a major concern for Americans and it is on the rise. Luckily, there are steps that you can take to prepare for rising prices and protect your finances. One of the best ways to fight inflation is to invest in assets that will hold their value or appreciate over time. This includes investing in stocks, real estate, and precious metals. These investments will increase in value as the cost of living goes up, giving you a buffer against inflation. Another solution to fighting inflation is to create a budget and stick to it. This will help you keep track of your spending and make sure that you are not overspending on items that are likely to increase in price. Additionally, saving money each month will give you a cushion to fall back on if prices do start to rise rapidly. There are many other solutions to fighting inflation, but these are two of the most effective. If you are concerned about rising prices, take action now and start preparing for the future. Conclusion If you're worried about rising prices in the United States, there are a few things you can do to prepare. First, start by evaluating your spending and see where you can cut back. Then, make sure you have an emergency fund in place so that unexpected expenses don't throw off your budget. Finally, keep an eye on inflation rates and invest in assets that will hold their value over time. By following these steps, you can protect yourself from rising prices and maintain your financial stability.
FOREXCOM:XAGUSDEducation
by RobinhoodFX
Another Rejection?!?!?If history will repeat itself based on this trendline then we know how to position ourselves with proper risk management. Levels are mapped out if we get another big correction. Love it or hate it, hit that thumbs up and share your thoughts below! Every day the charts provide new information. You have to adjust or get REKT. Don't trade with what you're not willing to lose. Safe Trading, Calculate Your Risk/Reward & Collect! This is not financial advice. This is for educational purposes only.
SP:SPXShort
by rnaofs
SPY Price action is a bit different this time aroundUmmm, the fast and short answer is that I am overall bearish on the SPY and anticipate we ultimately get rejected from this ATH (all time high) trendline ...however, it is starting to get complicated, lol. Disclaimer: Be aware the following comments are just my observations and I am not a professional trader. I am school teacher by day and stock junky by night, lol. I just enjoy looking at the charts, doing light TA and occasionally making a little money, lol. Anyways, here we go: We have finally reached the major downward sloping trend line or what I call the all time high trendline (ATH). There is the possibility that we can get a slight push above the ATH (all time high) trendline (currently $408-$407.5) - with the more likely contested area being between $409 - $415. I’m still a bit confused as to why anyone would think SPY would ever "breakout" above of this downtrend now. Our government is aggressively trying to reverse inflation - a breakout would be fighting against their efforts. I know I've said this a few times before - but a breakout would be flirting with a bull market - and I guess if that were to happen, I'd imagine that the FED would not only continue interest rate hikes, but they would also become even more aggressive. With that being said, I guess it would be judicious for me to also explore the bullish side of all of this, lol. Price action has been unusual and unlike the past two occasions we’ve approached the ATH trendline, this time has been with tremendous momentum. Also, it’s worth noting we’ve been in the general trend line area for over 3 days. The first time we touch the trendline (March 29th) we spent about 24 hours before diving back down. The second time (August 16th) we were rejected immediately. However, this time around we tagged the trend line around 3-4 times and even broke above it one of those days. Here is a pic of the charts for comparison: This could mean nothing at all – but I do think it is important to note that this time around it has been different. Perhaps it is signaling that the bear market is near it’s end but we might have one more leg down coming. …Oh and I just want to address one more thing, lol. The “Christmas Rally” - for all those who might be confused about when Christmas rallies typically occur, here you go: “A Santa Claus rally describes a sustained increase in the stock market that occurs in the week leading up to Dec. 25.” Santa Claus Rally Definition (investopedia.com) A very real possibility is that SPY begins that leg down now (as in next week, lol), creates the ultimate bottom (possibly the $330 area) and then Santa comes along sometime after the 18th and saves Christmas – and the market, lol.
AMEX:SPYShort
by DansGoneFishing
3
How does the market react after inflation peaks ? Hi guys, today I bring you an important point for macro analysis. Many believe that seeing a significant improvement in economic data, especially those linked to inflation, showing that it is slowing down is something positive, is it really? In a way, it's a positive metric when looked at in isolation, because inflation brings major disturbances to the economy, but that's a topic for another post. What matters is that the mere fact that inflation has marked a possible peak and the Fed has started to reduce interest rates does not mean that we are going to have a bottom in the market! Currently big banks are warning about the recession, and this for us, is not news, but look at this headline: "Jamie Dimon, CEO of JPMorgan Chase, talks of recession next year" But here we had already been talking about this recession for some time, after publishing a study talking about the inversion of the yield curve, in that study there was the following sentence: "According to the data available on the Federal Reserve website, the inversion of the yield curve preceded all American recessions since 1950, with the exception of a false signal in 1967." This publication was made on the So, yes, we have a contracted recession, but what does that have to do with peak inflation? Inflation brings, as a consequence, a scenario of uncertainties in the economy, and discourages new investments from being carried out. In practice, this causes difficulties for the country's economic growth, and once we have this combined with high interest rates, growth becomes even more difficult. So, even though inflation has reached its peak, interest rates are still very high, and we continue to struggle with economic growth and this usually happens, see the chart, after inflation peaks we had big drops. Will we see something similar again? Tell me your opinion here!
SP:SPX
by leandrosander_
29
USD/CAD eyes Bank of Canada meetThe Canadian dollar is slightly lower on Tuesday. In the European session, USD/CAD is trading at 1.3620, up 0.24%. The Bank of Canada has been aggressive in its tightening, including a whopping full-point hike in July, which brought the cash rate to 2.50%. The BoC has been gradually easing since then, raising rates by 75 bp and then 50 bp, bringing the cash rate to 3.75%. Will the trend continue on Wednesday? According to the markets, probably yes. There is a 72% chance of a 25 bp move, with a 28% likelihood of a second straight 50 bp move. At the October meeting, there was a 50/50 split over whether the BoC would raise rates by 50 or 75 bp, and the Bank opted for the more conservative move. With the Canadian economy showing signs of slowing down amidst an uncertain global outlook, a modest 25-bp hike would make sense. Still, it must be remembered that inflation remains very high at 6.9% and the BoC has shown that it is willing to keep the rate pedal on the floor if necessary. If the BoC goes for the 50 bp increase, it would be viewed as a hawkish surprise which would likely boost the Canadian dollar. What can we expect from the BoC in 2023? The terminal rate is projected at around 4.5%, which would mean several more rate hikes early in the New Year. Of course, rate policy will be heavily dictated by key data such as employment, consumer spending and inflation. In addition, the BoC will want to keep pace (or close to it) with the Federal Reserve, which is widely expected to raise rates by 50 bp next week. USD/CAD is testing resistance at 1.3619. Above, there is resistance at 1.3762 There is support at 1.3502 and 1.3359
by OANDA
The Resistance Hit 4th Time - SPX500 Saw the red line! It is now hit the 4th time by the market. Although oil has come down from 130 to 80 USD per barrel giving some relief to the oil-dependent economies and inflation is also in a downtrend, the problem is worse and deeper. This alarming deeper problem is US debt which is now 137% of the GDP. Imagine it was hardly 67% in 2008 during the financial crunch. If things were good, why did this debt rise to 137%. Debt is good for industries till it remains fuel for growth. But when it becomes fuel for existing debt it is really problematic.
SP:SPXLong
by starringinvestors
Interest Rate Futures and the First Cash Settled ContractCME: Eurodollar Futures ( CME:GE1! ), CBOT: Treasury Bond Futures ( CBOT:ZB1! ) This is the second installment of the Holidays series “Celebrating 50 Years of Financial Futures.” Before 1970, commercial banks did business by accepting short-term deposits at low regulated rates and offering longer-term business and personal loans at higher rates. Double-digit inflation changed all that. Federal Reserve eliminated interest rate ceilings on time deposits under 3 months in 1970, and on those over 3 months in 1973. Banks incurred huge loss from a negative spread with deposit rate higher than loan rate. Fast forward to 2022, we find ourselves in a high inflation and an inverted yield-curve environment again. The overnight Fed Funds rate (4.00%) is nearly 500 basis points higher than the 10-Year Treasury Note (T-Note) yield (3.51%) as of December 4th. Rising interest rates increase the financing cost from businesses to households alike. The Fed’s six consecutive rate hikes from March to November 2022 contributed to significant drawdown in the value of stocks, bonds, and commodities. If you bought $100,000 of Treasury bonds (T-bonds) in January, its market value could drop as much as 30% with bond yield jumping to 3.5% from 1.5%. If you owe $10,000 in credit card debt, monthly interest rate charge could run up to 25% a year from 15%. Like foreign exchange, interest rate is not a physical commodity. It is a right to holders of an interest-bearing product, and a liability to its issuer. The above examples show that both buyer and seller could have large financial exposure to changes in interest rates. To hedge interest rate risks, futures contracts were invented in Chicago futures markets, namely, Chicago Board of Trade (CBOT) and Chicago Mercantile Exchange (CME). CBOT Ginnie Mae Futures Government National Mortgage Association is a US government supported entity within the Department of Housing and Urban Development (HUD). The nickname “Ginnie Mae” come from its acronym GNMA. GNMA issues Ginnie Mae certificates, a type of mortgage-backed passthrough securities. Investors receive interest and principal payments from a large pool of mortgage loans. Since timely payments are backed by the full faith and credit of the US government, Ginnie Mae bonds are considered default risk free and have an AAA credit rating. Although they are free from default risk, holders of Ginnie Mae bonds are exposed to interest rate risk, as bond price moves inversely with bond yield. Sensing the need from savings and loans, mortgage bankers, and dealers of mortgage-backed securities, CBOT launched Ginnie Mae Bond Futures in October 1975. This was the first time a futures contract was based on an interest-bearing instrument. At contract expiration, futures buyers would receive actual Ginnie Mae bonds from futures sellers. While the Ginnie Mae contract has since delisted, it paved the way for the successful launches of other interest rate futures contracts in the 1970s and 1980s. CME Treasury Bill Futures Treasury bills (T-bills) are short-term securities issued by the US Treasury to help finance the spending of the federal government. New T-bills with maturities of thirteen, twenty-six, and fifty-two weeks are issued on a regular basis. The secondary market for T-bills is active, making them among the most liquid of money market instruments. In May 1972, the International Monetary Market (IMM) division of the CME launched foreign exchange futures, the first financial futures contract. In January 1976, the IMM listed futures contract on 90-day (13-week) T-bills. It was the first futures contract for a money market instrument. Nobel laureate Milton Friedman rang the opening bell on T-Bill Futures launch day. Upon maturity, seller is required to deliver T-bills with a $1 million face value and thirteen weeks left to maturity. Contracts for delivery in March, June, September, and December are listed. At any one time, contracts for eight different delivery dates are traded. T-bills do not pay explicit interest. Instead, they are sold at a discount to redemption value. The difference between the two prices determines the interest earned by a buyer. T-bill yields are quoted on a discount basis. Futures contracts are quoted on an index devised by the IMM, by subtracting the discount yield from 100. Index values move in the same direction as T-bill price. A rise in the index means that the price of a future delivered T-bill has risen. The formula for calculating the discount yield is: Discount Yield = ((Face Value - Purchase Price) / Face Value) X (360 / Days to Maturity) CBOT Treasury Bond Futures In August 1977, CBOT launched futures contracts on the T-Bonds. At the time, the birth of T-bond futures hardly seemed like a breakthrough. Financial futures were still in their infancy. Soybeans and corn were king in the CBOT trading pit. But all that changed in October 1979 when the Fed moved to strangle runaway inflation with a revised credit policy. The Saturday night massacre, as it was dubbed, ended decades of interest-rate stability. Interest rates bounced like a Ping Pong, affected by money supply, world events and inflation. Trading of T-Bond futures took off like a rocket. In addition to the traditional T-Bond futures (ZB) with 15-year maturity, CBOT also lists a 20-Yr T-Bond futures (TWE) and an Ultra T-Bond (UB) with 30-year maturity. In the Mid-curve, the T-Note suite includes 2-Yr Note (ZT), 3-Yr Note (Z3), 5-Yr Note (ZF), 10-Yr Note (ZN), and Ultra 10-Yr T-Note (TN). On December 2, 2022, daily volume of the first T-Bond futures was 388,370 contracts, while open interest reached 1,170,800 contracts. Daily volume of all CME Group interest rates futures and options contracts (IR) reached 13,786,454 lots, contributing to 54.1% of Exchange total. IR open interest was 78,244,297 lots, representing 70.4% of Exchange total. Cash Settlement Comes to Futures Market Up until now, futures contracts were settled by physical delivery of the underlying commodities. • Buyer of 1 CME Live Cattle may pick up 35 cows (40,000 pounds) from Union Stockyard in Chicago southside or take delivery at a cattle auction in Wyoming. • Seller of 1 CBOT Soybean contract would ship 5,000 bushels of the grain to a licensed grain elevator in Illinois, Iowa, or Kansas. • For CME Pork Bellies, settlement may involve title changes of warehouse receipt from seller to buyer for 40,000 pounds of the frozen meat in a cold storage. Even financial futures required physical delivery at that time. • For British Pound/USD contract, it is £62,500 in pound sterling. • For Ginnie Mae contract, it is $10 million worth of Ginnie Mae certificate. • T-Bond futures calls for delivery of treasury bonds with face value of $100,000 and maturity of no less than 15 years. As we discussed in “The Bogeyman in Financial Contracts”, there is inherent risk in the physical delivery mechanism. No matter how robust its original design is, industry evolution could outgrow capacity, rendering delivery failure under extreme market conditions. In December 1981, CME launched Eurodollar futures, the first contract with cash settlement feature. Cash settlement alone can be viewed as a financial revolution. Why? • It significantly reduces transaction cost, which in turn enhances the risk transfer or hedging function in futures. • It allows non-commercial users to participate in futures. Broader participation improves liquidity, and the price discovery as well as risk management functions. CME Eurodollar Futures Eurodollars are dollar-deposits held with banks outside of the US. There are two types of Eurodollar deposits: nontransferable time deposits and certificates of deposit (CDs). Time deposits have maturities ranging from 1 day to 5 years, with 3 months being the most common. Eurodollar CDs are also commonly issued with maturities under a year. Technically, buyer of Eurodollar future contract is required to place $1,000,000 in a 3-month Eurodollar time deposit paying the contracted interest rate on maturity date. However, this exists only in principle and is called a “Notional Value”. Cash settlement means that actual physical delivery never takes place; instead, any net changes in the value of the contract at maturity are settled in cash on the basis of spot market Eurodollar rates. Unlike T-bills, Eurodollar deposits, the underlying of Eurodollar futures, pay explicit interest. The interest paid on such deposit is termed an add-on yield because the depositor receives the face amount plus an explicit interest payment when the deposit matures. In the case of Eurodollar, the add-on yield is the London Interbank Offered Rate (LIBOR), which is the interest rate at which major international banks offer to place Eurodollar deposits with one another. Like other money market rates, LIBOR is an annualized rate based on a 360-day year. Price quotations for Eurodollar futures are based on the IMM Eurodollar futures price index, which is is 100 minus the LIBOR. In the following four decades, all financial futures are designed with cash settlement. Eurodollar futures paves the way for equity index futures, which were launched in February 1982 at Kansas City Board of Trade (KCBT) and April 1982 at CME. Without cash settlement, can you imagine how to deliver 500 different stocks on a market-weighted basis for the S&P 500 futures? Or 2,000 stocks for the Russell 2000? 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 trade set-ups and express my market views. If you have futures in your trading portfolio, check out on CME Group data plans in TradingView that suit your trading needs www.tradingview.com
CBOT:ZB1!Education
by JimHuangChicago
9
Wheat Futures Ready to Pop Again. Same Signal to Start 2020 BoomCOT Data is signaling that Wheat Futures ( CBOT:ZW1! ) are ready to pop after a few months of declines and chop As it currently stands, this is the shortest the Large Speculators have been on Wheat since 2020 where it bottomed at 589'4 to rally all the way as high as 1422'0. By no means do I expect a similar rally to ensure, but this does illustrate how oversold the large speculators are and what the consequences of that can be. I'm looking for a technical long reversal entry on the daily chart to enter the trade and then use sound risk management thereafter Notes on My Trading Methodology and What I'm Even Talking About COT Definitions: - COT: Commitments of Traders Reports - A weekly report published by the government (CFTC) that shows long and short positions of the below 3 groups (As well as much more data I don't look at). We look at the NET positions of these 3 groups and compare them to historical levels to signal trade opportunities 1- Commercials: Hedgers - We want to trade with them when they're at extreme levels (Think Tyson, Cargill, General Mills, etc) 2- Large Speculators: Hedge funds and large institutions - We want to fade them when they are at max positions (Think suits in NYC and commodity funds) 3- Small Speculators: People/institutions trading small lot sizes not big enough to report to CFTC - We want to fade their max positions as well since they represent the public (Think dude in his PJs trading and small trading firms) Indicators on Chart: - The first indicator shows the net positions of the 3 groups above plotted over time - The second indicator is an index of the relative buying/selling of commercials over a certain lookback period. Anything above 95 is looking for buy, look to sell when it hits 0 - Note: Just because the Commercial's net position is negative doesn't mean it can't be relatively net long and signal a buy (same in the opposite scenario) Trade Setup - Both Must Happen: - When commercials are at max levels we are alerted to buy or sell (Depending on the criteria above) - On a daily chart, use technical indicators, candlestick patterns, news, etc to enter the trade (not shown here) - Added bonus when the trend is your friend (I use a Multiple Moving Averages indicator to visualize)
CBOT:ZW1!Long
by Rudeadam18
The USD Outlook- Elliott WavePCE was out, seems like Inflation is stable. Powell noted they will slow down the hike, so even if data is strong they will probably stick to the plan. If data is bad, which is not impossible, considering that economy is slowing down, then the DXY will fall further. So I see win-win for the bears on DXY going forward. But there will be pullbacks of course. Here is another count I am looking at; potential impulse from a monthly channel top. I will turn back bullish if I see strong bounce from 103.80 and back to 109.
TVC:DXY
by ew-forecast
1
How I see BitcoinHello everyone, this is how I see Bitcoin in the long run. Looking at the weekly timeframe, I am still bearish on Bitcoin right now as it is still trading below the 200-EMA since June 16th, 2022. Also, we're currently in a technical recession after the FED of Atlanta has estimated a negative -2.1% for Quarter 2 of 2022. We already had a negative -1.6% decline for Quarter 1 and now after the FED of Atlanta released their estimates, we're definitely in the technicalities of a recession. If you don't believe we're in a recession right now, just look awful the big retailers did for their Quarter 1 earnings. Walmart and Target did terrible as their revenue went down from consumers cutting their spending due to inflation and of course the cost of gas/diesel, affecting truckers and consumers. Look at Target, when their Q1 earnings were released on May 18th, 2022; they had an excessive inventory as Target highlighted that there is less customer traffic in their stores, meaning that consumers are not spending as much simply because everything is getting too damn expensive, due to inflation! As consumers cut back on their spending, it will obviously affect the GDP. Just look at the consumer sentiment from the University of Michigan. It's at the lowest it has ever been recorded. It's not just consumer spending, look at how many times the 2-year and 10-year treasury yields have inverted this year. The 2-year and 10-year treasury yields have inverted multiple times in February, March, April, May, and today, as of typing this right now. Many tech companies like Coinbase, Meta, Tesla, etc., have all stopped hiring people since May of 2022, in order to cut back on Salaries and Wages Expenses, due to inflation and bad market sentiment. I could keep going on and on as there are many indicators of a recession. Obviously, we still have to wait for an official announcement from the U.S. Bureau of Economic Analysis on July 28th, 2022; whether we're in a recession or not. How does this all relate to Bitcoin? Well, for the past 4 months, every time the CPI data was released, Bitcoin always had a negative reaction to it. As inflation increases, this will cause the markets to dip even further, meaning that investors will draw away from their investments and will be on cash instead during a recession. Since we are in technicalities of a recession due to the FED of Atlanta, expect the stock market to have a negative reaction, causing the price of shares to go down, which in result, will cause a negative reaction to the crypto market in the short-term. So July 13th (CPI Data Release) and July 28th (Real GDP Data Release) will be two important days for July 2022. In the meantime, just because I am bearish on Bitcoin doesn't necessarily mean it's the end of the world. I am still bullish on Bitcoin for the long run. Just zoom-out and relax. Disclaimer: (I am not a financial advisor! Always conduct your own research before investing.)
BITSTAMP:BTCUSD
by brandonreymejia
Inflation slowdown for the AussiesToday, the Australian CPI y/y was released at 6.9% (Forecast: 7.6% Previous: 7.3%) which signaled a slowdown in the overall inflation growth. Although 6.9% is still higher than the target level of 2-3%, could this lead to a slowdown in the future interest rate hikes from the RBA? On the release of the economic data, the AUDUSD traded slightly higher from the 0.6680 price level toward the 0.67 round number resistance level. Look for the price to break above 0.67 to signal a stronger reversal higher, with the next key resistance level at 0.6780.
Long
by JinDao_Tai
6
Fed vs. Inflation 4:6CME: SOFR Futures ( CME:SR31! ), E-Micro S&P 500 ( CME_MINI:MES1! ) While football fans are fervently following the 2022 World Cup, we analogize the Federal Reserve’s year-long battle with surging inflation to a football match. In this game, the Core CPI had an early advantage over the Fed Funds Rate, at 6.00% vs. 0.25% in January. The Fed mounted decisive offense, raising rates to 4.00% and bringing the deficit down to 2 points. But make no mistake – we are still trailing in the game. The Fed would not accept defeat. With stoppage time and overtime, the fight against inflation could drag on well into 2023. When could the Fed declare victory? Its stated goal is to keep inflation at 2%. Most of us think this is unrealistic. In my opinion, the Fed needs to bring Core CPI below the Fed Funds rate at a bare minimum. The Fed has been known to be data-driven. Unless there is conclusive data showing the inflation is on the way down and the economy is cooling, the Fed is unlikely to end its monetary tightening policy. The talk of Fed Pivot is very misleading. Slowing the pace of rate hikes doesn’t mean an overhaul of monetary policy. The Fed simply needs time to collect more data and evaluate if previous rate hikes are working. A lot depends on how quickly Core CPI comes down. It peaked at 6.6% in September and lowered to 6.3% in October. But one data point doesn’t make a trend. • In 2022, Core CPI ranges from 5.9% to 6.6%. • In 2021, it was between 1.3% and 5.5%. • The last time Core CPI fell below 4% was in May 2021. • Before 2022, it was 40 years ago (August 1982) when Core CPI went above 6.0%. In the past 1-1/2 years, Core CPI ran up very quickly and then stabilized at a very high level. Any projection of 4% Core CPI is not supported by data. I don’t see Fed would take such hypothesis into consideration. Statistically speaking, bringing Core CPI down below Fed Funds rate could only be achieved by raising rates. The BLS will release November CPI data on December 13th, and the next FOMC meeting is scheduled on December 13th-14th. The Fed would have the most recent inflation data available in voting for its December rate decision. Short-term: Fed Pivot Trade Current market expectation is for the Fed to break its consecutive 75-point hikes. Any rate increase below 75 bp would give a big boost to market morale. Expect the stock market to rally, and the US dollar and bond yield to retreat. CPI data release and Fed decision are the “one-two-punch” ideal for short-term event driven strategies. There are good candidates I like for potential trade setup, from a risk-reward standpoint: • Call Options for CME E-Micro S&P 500 Futures (MES) • Call Options for E-Micro NASDAQ 100 (MNQ) • Call Options for CME Euro FX (M6E) • Call Options for CME 30-day Fed Funds Futures (ZQ) • Call Options for Three-Month SOFR Futures (SR3) For a rate increase below 75 bp, stock market is expected to rally, so it is bullish for MES and MNQ. US dollar will pull back, so it is bullish for Euro/USD exchange rate. Short-term interest rate futures are quoted as discounted instrument, 100 – Rate. Lowered expected interest rates translate into higher futures prices. Therefore, it is also bullish for ZQ and SR3. Medium-term: Recession The world runs on credit. Fed monetary tightening policies have made it more costly for businesses and households to obtain credit. The run-up in cost happened very quickly and the impacts are profound. Below are comparisons of interest rates between December 2021 and November 2022, taken from various sources: • 30-year-fixed mortgage: from 3.646% to 7.296% • 60-month auto loan rate: from 3.85% to 5.29% • Average credit card rate: from 14.91% to 19.20% • AAA corporate bond rate: from 2.06% to 4.64% • BBB corporate bond rate: from 2.53% to 5.88% • SBA loan rate: from 6%-8% to 11.5%-13.5% Even if the Fed stops raising rates now, financing costs are not likely to return to previous levels. The unwinding of Fed policy takes time. There is no indication that the Fed would lower rates after the terminal rate is reached. More likely than not, businesses and households would bear high interest cost well into 2024. While Core CPI excludes food and energy, their impacts are felt everywhere. Take diesel as an example, the national retail average price is $5.228/gallon on November 27th, according to the American Automobile Association (AAA). • This is 58.8 cents (-10.1%) below its all-time high of $5.816 set on June 19th. However, it is still 69.7% higher than a year ago. • Comparing to gasoline, at $3.555/gallon, it is $1.461 or 29.1% below its record high of $5.016. But it is a modest increase of 4.7% year over year. Diesel price is a tax on all products requiring highway transportation. Fed rate hikes are not likely to lower diesel production cost. In addition, higher wages, higher rents, and higher borrowing cost would stick, long after the Fed stop hiking rates. In my view, the US could not avoid a recession in 2023. Weakening corporate profit and elevated unemployment will eventually take a toll on stock prices. We have witnessed a strong Black Friday sales season. But worrisome signs emerge that US consumers are increasingly constrained by their budget. According to a CNBC report, Walmart is the most visited shopping destination. Higher priced Bloomingdale and Nordstrom reported a lull in sales earlier this month. The downgrade from premium department stores to discount stores is a leading indicator, a classic economic example that inferior products thrive during a recession. Another warning sign, “Buy Now Pay Later” payments increased by 78% compared with the past week, according to the CNBC report. Consumers still want to get the great deals for holidays, but they need help with financing. If the market rallies after the November CPI data and December FOMC decision, it’s a good time to set up a 3–6-month trade shorting the stock market. Investor sentiment has significant impacts in the short term. But fundamental factors will win over in the medium/long term. If inflation fails to decline materially, the Fed will stay on its tightening course. 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 trade set-ups and express my market views. If you have futures in your trading portfolio, check out on CME Group data plans in TradingView that suit your trading needs www.tradingview.com
CBOT:ZQ1!Long
by JimHuangChicago
5