S&P 500 Pushing New Highs Ahead of Powell Testimony
S&P 500 Pushing New Highs Ahead of Powell Testimony
Also, 30-year T-bond, gold, natural gas and Japanese yen futures
S&P 500 E-mini futures (/ES): +0.19%
30-year T-bond futures (/ZB): -0.32%
Gold futures (/GC): +0.18%
Natural gas futures (/NG): +3.09%
Japanese yen futures (/6J): -0.2%
U.S. equity futures rose this morning after the S&P 500 and Nasdaq posted record high closes yesterday. Investors are betting that the Federal Reserve has enough ammo to start cutting rates in September, a bet reflected by Feds Funds futures. Fed Chair Jerome Powell is set to start two days of testimony before Congress today. Traders are also focused on inflation data due later this week. BP (BP) is down nearly 5% in morning trading after the oil company said weak refining margins and trading will hurt its second-quarter profit.
Symbol: Equities | Daily Change |
/ESU4 | +0.19% |
/NQU4 | +0.3% |
/RTYU4 | -0.17% |
/YMU4 | +0.02% |
Nasdaq futures (/NQU4) were 0.29% higher this morning ahead of Powell’s testimony. Traders are closely watching to assess his position on rate hikes amid a slowing labor market and falling inflation. Congress may also have questions about a proposal that would have banks set aside more capital to buffer themselves from a financial shock. Big banks will kickoff earnings season later this week.
Strategy: (52DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 5580 p Short 5590 p Short 5690 c Long 5700 c | 16% | +395 | -105 |
Short Strangle | Short 5590 p Short 5690 c | 48% | +6,725 | X |
Short Put Vertical | Long 5580 p Short 5590 p | 62% | +170 | -330 |
Symbol: Bonds | Daily Change |
/ZTU4 | -0.04% |
/ZFU4 | -0.11% |
/ZNU4 | -0.16% |
/ZBU4 | -0.32% |
/UBU4 | -0.4% |
Treasuries are slightly lower this morning, following a move that started overnight in Europe as fears around fiscal policy in France grew. The 30-year T-bond contract (/ZBU4) was down 0.32% ahead of the New York open. Fed Funds futures are currently pricing in a rate cut by September, but today’s comments may sway those bets and with it the bond market. The Treasury will auction three-year notes today.
Strategy (45DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 116 p Short 117 p Short 121 c Long 122 c | 39% | +593.75 | -406.25 |
Short Strangle | Short 117 p Short 121 c | 58% | +2156.25 | x |
Short Put Vertical | Long 116 p Short 117 p | 70% | +328.13 | -671.88 |
Symbol: Metals | Daily Change |
/GCQ4 | +0.18% |
/SIU4 | +0.94% |
/HGN4 | -0.3% |
Gold prices are slightly higher this morning despite a stronger dollar and Treasury yields. China didn’t buy any gold for a second month in June, with its reserves for the precious metal holding steady at 72.8 million troy ounces. High prices for the metal likely discouraged China from buying, but it may step back in if prices fall. That could provide a floor below gold prices.
Strategy (49DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 2350 p Short 2355 p Short 2385 c Long 2390 c | 13% | +430 | -70 |
Short Strangle | Short 2355 p Short 2385 c | 56% | +7990 | X |
Short Put Vertical | Long 2350 p Short 2355 p | 61% | +200 | -300 |
Symbol: Energy | Daily Change |
/CLQ4 | -0.26% |
/HON4 | -0.58% |
/NGN4 | +3.09% |
/RBN4 | +0.08% |
Natural gas futures (/NGQ4) rose for a second day in an apparent technical bounce. Energy traders continue to assess reports from Texas, where a hurricane swept through the state. The channel to Port of Corpus Christi, the main crude oil export hub, reopened yesterday but other energy-critical infrastructure remains offline. Freeport LNG, a liquefied natural gas facility, closed for the storm. That could reduce LNG exports over the short term. Natural gas may have more room to run higher until it reaches its 9- and 12-day exponential moving averages.
Strategy (49DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 2.25 p Short 2.3 p Short 2.57 c Long 2.6 c | 57% | +310 | -190 |
Short Strangle | Short 2.3 p Short 2.57 c | 56% | +2680 | X |
Short Put Vertical | Long 2.25 p Short 2.3 p | 57% | +210 | -290 |
Symbol: FX | Daily Change |
/6AU4 | -0.04% |
/6BU4 | -0.05% |
/6CU4 | -0.01% |
/6EU4 | -0.06% |
/6JU4 | -0.2% |
Japanese yen futures (/6JU4) are under pressure from a stronger dollar as yields in the U.S. rise ahead of Powell’s testimony. Intervention fears are present but not immediate with prices above the July swing low. Meanwhile, banks in Japan are calling on the Bank of Japan to cut its monthly bond purchases, according to Bloomberg. The news service cited people who attended the meeting.
Strategy (31DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 0.0062 p Short 0.006225 p Short 0.006325 c Long 0.00635 c | 30% | +212.50 | -100 |
Short Strangle | Short 0.006225 p Short 0.006325 c | 55% | +1037.50 | X |
Short Put Vertical | Long 0.0062 p Short 0.006225 p | 69% | +112.50 | -200 |
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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