S&P 500 Erases Weekly Losses; Gold, Silver Rally Loses Momentum
S&P 500 Erases Weekly Losses; Gold, Silver Rally Loses Momentum
Also 10-year T-Note, Silver, Natural Gas, and Japanese Yen Futures
- S&P 500 E-mini futures (/ES): +0.26%
- 10-year T-Note futures (/ZN): +0.06%
- Silver futures (/SI): -1.63%
- Natural Gas futures (/NG): -1.11%
- Japanese Yen futures (/6J): -0.5%
More lackluster U.S. jobs data (the August ADP employment change report produced a meager gain of +55K) has traders lining up for a softer August U.S. nonfarm payrolls report tomorrow. U.S. equity markets are modestly higher, with the S&P 500 erasing its losses from the start of the month, while bonds are a few tickers higher across the curve. The biggest movers on the day are the metals, but in the other direction: after achieving fresh yearly highs (and all-time highs for the former), gold and silver prices are down around -1% this session.
| Symbol: Equities | Daily Change |
| /ESU5 | +0.26% |
| /NQU5 | +0.23% |
| /RTYU5 | +0.35% |
| /YMU5 | +0.27% |
S&P 500 futures (/ESU5) were mixed in early trading before moving higher an hour into the trading session. A mixed batch of economic data crossed the wires Thursday morning that showed some slowing in the labor market. Salesforce (CRM) fell over 6% after the company provided weak guidance. American Eagle Outfitters (AEO) surged 30% on a big earnings beat. ConocoPhillips (COP) announced that it would cut up to 25% of its workers. The stock was up 0.6% this morning. Broadcom (AVGO) will report earnings after the bell today, giving traders insight into the state of the chip industry.
| Strategy: (40DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 6150 p Short 6200 p Short 6800 c Long 6850 c | 63% | +472.50 | -2027.50 |
| Short Strangle | Short 6200 p Short 6800 c | 68% | +2337.50 | x |
| Short Put Vertical | Long 6150 p Short 6200 p | 86% | +245 | -2255 |
| Symbol: Bonds | Daily Change |
| /ZTZ5 | +0.03% |
| /ZFZ5 | +0.07% |
| /ZNZ5 | +0.06% |
| /ZBZ5 | +0.05% |
| /UBZ5 | +0.05% |
Bonds rose at the short-end of the curve after this morning’s labor market data boosted rate cut bets for the Federal Reserve’s meeting this month. 10-year T-Note futures (/ZNZ5) gained 0.08% Thursday morning. Tomorrow’s jobs report will likely influence rate cut bets further, which should move bond prices as well. Rate cut bets beyond September are harder to predict but an October cut is becoming more likely. If inflation doesn’t pick up significantly, there will likely be more downward pressure on yields.
| Strategy (50DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 110 p Short 111 p Short 115 c Long 116 c | 61% | +265.63 | -734.38 |
| Short Strangle | Short 111 p Short 115 c | 67% | +546.88 | x |
| Short Put Vertical | Long 110 p Short 111 p | 83% | +156.25 | -843.75 |
| Symbol: Metals | Daily Change |
| /GCZ5 | -0.97% |
| /SIZ5 | -1.63% |
| /HGZ5 | -1.21% |
Silver futures (/SIZ5) pulled back on Thursday morning after a five-day winning streak pushed the metal to its highest level since September 2011. The move is likely being driven by some profit taking following the recent gains amid a modest rebound in the dollar. If the metal can remain above the 41 handle, it could offer an entry point for traders to get long for another extension higher. Tomorrow’s jobs data will be a factor for the direction of precious metals going into the weekend.
| Strategy (54DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 37 p Short 37.5 p Short 45.5 c Long 46 c | 62% | +765 | -1735 |
| Short Strangle | Short 37.5 p Short 45.5 c | 70% | +4635 | x |
| Short Put Vertical | Long 37 p Short 37.5 p | 81% | +390 | -2110 |
| Symbol: Energy | Daily Change |
| /CLV5 | -1.14% |
| /HOV5 | -2.12% |
| /NGV5 | -1.11% |
| /RBV5 | +0.4% |
Natural gas futures (/NGV5) were slightly lower Thursday morning but prices remained above the 3 handle following six days of gains in the commodity. The Energy Information Administration (EIA) will report inventory data today, with traders expecting a 54 billion cubic feet (Bcf) injection for last week. Meanwhile, weather models through the next couple of weeks remain unsupportive for gas demand, which is throttling gains.
| Strategy (54DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 2.6 p Short 2.7 p Short 4 c Long 4.1 c | 67% | +290 | -710 |
| Short Strangle | Short 2.7 p Short 4 c | 74% | +1270 | x |
| Short Put Vertical | Long 2.6 p Short 2.7 p | 84% | +150 | -850 |
| Symbol: FX | Daily Change |
| /6AU5 | -0.66% |
| /6BU5 | -0.13% |
| /6CU5 | -0.28% |
| /6EU5 | -0.24% |
| /6JU5 | -0.5% |
Currency markets are tilting back in favor of a stronger U.S. Dollar, a notable development given the fact that U.S. Treasury yields are lower on the day. The retrenchment in precious metals and cryptocurrencies may be helping a lift to the greenback; weakness in fiat alternatives often comes alongside a stronger U.S. Dollar. The standout today is the Japanese Yen (/6JU5), which is beginning to show that higher JGB yields are becoming an albatross.
| Strategy (64DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 0.0064 p Short 0.0065 p Short 0.007 c Long 0.0071 c | 62% | +337.50 | -912.50 |
| Short Strangle | Short 0.0065 p Short 0.007 c | 68% | +825 | x |
| Short Put Vertical | Long 0.0064 p Short 0.0065 p | 88% | +137.50 | -1112.50 |
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
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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