Nasdaq 100 Rally Stalling; Traders Await OPEC+ News
U.S. equity markets have been bobbing back and forth between modest gains and modest losses on Thursday amid the flurry of U.S. economic data this morning.
The rise in Treasury yields may be proving to be a bit of an albatross, as stock indexes have been weakening. It may prove to be a point of concern that U.S. equity indexes, in particular the Nasdaq 100 (/NQZ3), were not able to take advantage of the decline in yields in recent days. Now that yields are bumping higher, more difficult conditions are coming together for stocks.
Data released this morning provided more evidence that the Federal Reserve’s fight against inflation is wrapping up. The October U.S. personal consumption expenditures (PCE) index, the Fed’s preferred gauge of inflation, came in right at expectations. Weekly U.S. jobless claims figures showed that continuing claims rose to their highest level of the year. However, U.S. Treasury yields are pushing higher amid a continued rise in energy prices, which are awaiting the results of a much-hyped OPEC+ meeting.
Symbol: Equities | Daily Change |
/ESZ3 | +0.14% |
/NQZ3 | +0.06% |
/RTYZ3 | +0.64% |
/YMZ3 | +0.56% |
Symbol: Bonds | Daily Change |
/ZTZ3 | -0.04% |
/ZFZ3 | -0.20% |
/ZNZ3 | -0.27% |
/ZBZ3 | -0.59% |
/UBZ3 | -0.58% |
Inflation data on the screws? Check. Signs of a weaker labor market? Check. And yet, U.S. Treasury bonds are weaker across the curve. One possible explanation may be the continued push higher by crude oil prices (/CLF4), which is translating into a bump in market measures of inflation expectations. Weakness is most pronounced at the long end of the curve, where 30s (/ZBZ3) and ultras (/UBZ3) are down around a full point each.
Strategy (57DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 112 p Short 113 p Short 121 c Long 122 c | 51% | +437.50 | -562.50 |
Long Strangle | Long 112 p Long 122 c | 32% | x | -1468.75 |
Short Put Vertical | Long 112 p Short 113 p | 78% | +234.38 | -765.63 |
Symbol: Metals | Daily Change |
/GCG4 | -0.51% |
/SIH4 | +0.03% |
/HGZ3 | +0.37% |
The bump in U.S. Treasury yields and the stronger U.S. dollar are proving to be headwinds for precious metals on Thursday, with both gold (/GCG4) and silver prices (/SIH4) slipped over the course of the morning. Nonetheless, precious metals appear well-situated in the short term, having just reached fresh monthly highs yesterday. Moreover, December has been a historically strong month, from a seasonal perspective.
Strategy (26DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 25.2 p Short 25.25 p Short 25.75 c Long 25.8 c | 13% | +220 | -30 |
Long Strangle | Long 25.2 p Long 25.8 c | 45% | x | -5280 |
Short Put Vertical | Long 25.2 p Short 25.25 p | 58% | +115 | -135 |
Symbol: Energy | Daily Change |
/CLF4 | +1.43% |
/HOZ3 | +0.59% |
/NGF4 | -3.15% |
/RBZ3 | +0.58% |
The world awaits news from the delayed OPEC+ meeting, which is currently ongoing. News reports ahead of any formal announcement suggest that there will be quota changes for smaller member states and a 1 million barrel-per -day production cut by Saudi Arabia through the end of 2024. The table has been set for a short-term bump higher in crude oil prices (/CLF4), which has gained nearly +4.5% this week alone.
Strategy (48DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 76 p Short 76.5 p Short 81.5 c Long 82 c | 20% | +370 | -130 |
Long Strangle | Long 76 p Long 82 c | 46% | x | -5120 |
Short Put Vertical | Long 76 p Short 76.5 p | 58% | +190 | -310 |
Symbol: FX | Daily Change |
/6AZ3 | -0.58% |
/6BZ3 | -0.68% |
/6CZ3 | -0.22% |
/6EZ3 | -0.70% |
/6JZ3 | -0.70% |
Data across the major currency countries continues to weaken, undercutting recent rallies versus the U.S. dollar. Notably, October Eurozone inflation data came in softer than expected and the third-quarter Canada GDP rate came in well below forecasts at -1.1% annualized.
Both the Euro (/6EZ3) and the British pound (/6BZ3) are competing for the title of worst performers on the session, though the Japanese Yen (/6JZ3) has been dinged by higher energy prices and rising bond yields as well.
Strategy (36DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1.24 p Short 1.25 p Short 1.285 c Long 1.29 c | 54% | +137.50 | -175 |
Long Strangle | Long 1.24 p Long 1.29 c | 30% | x | -393.75 |
Short Put Vertical | Long 1.24 p Short 1.25 p | 81% | +68.75 | -243.75 |
Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
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