Russell 2000 Continues Surge Post-FOMC
Russell 2000 Continues Surge Post-FOMC
Also, 30-year T-bond, silver, crude oil and euro futures
- Russell 2000 e-mini futures (/RTY): +2.69%
- 30-year T-bond futures (/ZB): +0.87%
- Silver futures (/SI): +1.41%
- Crude oil futures (/CL): +3.48%
- Euro futures (/6E): +0.73%
Fed Chair Jerome Powell gifted markets exactly what they wanted this holiday season, showcasing the end of the rate hike cycle and outlining a path forward for interest rate cuts to begin as early as March 2024.
Both stocks and bonds have been off to the races over the past 24 hours, with all four major U.S. indexes and each of the five bond futures sitting at their monthly highs. Meanwhile, a weaker U.S. dollar in the wake of the Federal Open Market Committee (FOMC), European Central Bank (ECB), and Bank of England (BOE) meetings has provided a healthy tailwind for commodity prices, which are up everywhere, from precious metals to base metals to energy.
Symbol: Equities | Daily Change |
/ESH4 | +0.40% |
/NQH4 | +0.34% |
/RTYH4 | +2.69% |
/YMH4 | +0.09% |
Russell 2000 leads the pack
Stocks continue to surge across the board, with the Russell 2000 (/RTYH4) leading the way higher for the second consecutive day; /RTYH4 is now up more than +7% from yesterday’s low. Meanwhile, all-time closing highs are within reach for the Nasdaq 100 (/NQH4) and the Dow Jones 30 (/YMH4). The S&P 500 (/ESH4) is approximately 2% away from all-time highs.
Strategy: (48DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1900 p Short 1925 p Short 2150 c Long 2200 c | 56% | +540 | -1960 |
Long Strangle | Long 1900 p Long 2200 c | 27% | x | -1230 |
Short Put Vertical | Long 1900 p Short 1925 p | 76% | +250 | -1000 |
Symbol: Bonds | Daily Change |
/ZTH4 | +0.20% |
/ZFH4 | +0.39% |
/ZNH4 | +0.47% |
/ZBH4 | +0.87% |
/UBH4 | +1.15% |
Pressure on bond markets
The Federal Reserve’s new Summary of Economic Projections (SEP) report has spurred a strong belief among market participants that interest rates are headed lower from here, keeping upside pressure on bond markets. The long end of the curves continues to lead the way, with 30s (/ZBH4) and ultras (/UBH4) posting the strongest gains. The 10-year Treasury yield hit a session low of 3.932% overnight.
Strategy (43DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 118 p Short 119 p Short 127 c Long 128 c | 55% | +390.63 | -609.38 |
Long Strangle | Long 118 p Long 128 c | 29% | x | -1171.88 |
Short Put Vertical | Long 118 p Short 119 p | 79% | +218.75 | -781.25 |
Symbol: Metals | Daily Change |
/GCG4 | +0.97% |
/SIH4 | +1.41% |
/HGH4 | +2.91% |
Gold surges
Gold prices (/GCG4) are up and on track to erase all losses since Dec. 5, while silver prices (/SIH4) have taken back everything since Dec. 6. For the latter, /SIH4 is nearly +7% off the weekly lows set yesterday. The precious metals market is offering a very clear signal that market participants believe U.S. Treasury yields are going to continue along their downward trend for the foreseeable future.
Strategy (42DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 24.15 p Short 24.2 p Short 24.7 c Long 24.75 c | 11% | +225 | -25 |
Long Strangle | Long 24.15 p Long 24.75 c | 46% | x | -6535 |
Short Put Vertical | Long 24.15 p Short 24.2 p | 56% | +130 | -120 |
Symbol: Energy | Daily Change |
/CLF4 | +3.48% |
/HOH4 | +2.20% |
/NGF4 | +2.06% |
/RBH4 | +3.68% |
Crude oil rises
Crude oil prices (/CLF4) are up over 3% this morning as the market cheers the FOMC’s updated rate projections. It is looking increasingly likely that the Fed will accomplish its soft landing and avoid a recession.
Yesterday also saw the Energy Information Administration (EIA) report a 4.3-million-barrel draw for the week ending Dec. 8, the first bullish report in a few weeks. Still, softness in Asia and Europe, along with record-high U.S. production may pose a headwind for a sustained rally.
Strategy (34DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 69 p Short 69.5 p Short 74.5 c Long 75 c | 29% | +350 | -150 |
Long Strangle | Long 69 p Long 75 c | 42% | x | -3190 |
Short Put Vertical | Long 69 p Short 69.5 p | 64% | +170 | -330 |
Symbol: FX | Daily Change |
/6AH4 | +0.59% |
/6BH4 | +0.82% |
/6CH4 | +0.49% |
/6EH4 | +0.73% |
/6JH4 | +0.92% |
ECB diverges from the Fed
“Sufficiently restrictive” is the European Central Bank’s language describing its decision to resist rate cuts. The decision sets ECB apart from the Federal Reserve, which is now on a dovish path toward rate cuts in 2024.
The Euro (/6EH4) is reacting to the upside against a softer dollar. Traders will look to clear the November high, but it may not make it there before the weekend. Still, the Euro has a bullish backdrop, although relatively subdued economic activity across the Euro Zone may limit just how much upside the currency has.
Strategy (57DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1.075 p Short 1.08 p Short 1.12 c Long 1.125 c | 52% | +250 | -375 |
Long Strangle | Long 1.075 p Long 1.125 c | 32% | x | -725 |
Short Put Vertical | Long 1.075 p Short 1.08 p | 85% | +!12.50 | -512.50 |
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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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