S&P 500 Gyrates as the Dollar’s Strength Persists
S&P 500 Gyrates as the Dollar’s Strength Persists
Also five-year T-note, gold, crude oil, and Australian dollar futures
S& 500 E-mini futures (/ES): -0.06%
Five-year T-note futures (/ZF): +0.23%
Gold futures (/GC): -0.29%
Crude oil futures (/CL): -0.25%
Australian dollar futures (/6A): -0.68%
Appetite for risk surged this week after the Federal Reserve and other central banks tempered hawkish expectations around monetary policy.
The Dow Jones (YMM4) and S&P 500 (/ESM4) are on track to record their best weekly performances of the year, up 2.64% and 2.24% as of this morning.
Treasuries are up for the fourth consecutive day, and equities are taking a breather ahead of the opening bell. Virtually zero event risk is left before the weekend, so price action to start the day should reveal a potential trend.
Symbol: Equities | Daily Change |
/ESM4 | -0.07% |
/NQM4 | -0.12% |
/RTYM4 | -0.45% |
/YMM4 | -0.15% |
Dow jones futures (/YMM4) are trading nearly unchanged this morning, down only 0.15% ahead of the opening bell. Strength in industrials has helped carry the index to a record high after the Fed updated its growth forecast earlier this week.
Stocks like Caterpillar (CAT), up over 5% on the week, have helped to fuel the risk-on move in the industrial-heavy index. The S&P 500 (/ESM4) is also on track to record its best week, down 0.07%, although stocks like Nike (NKE) are weighing on sentiment in retail stocks.
Strategy: (39DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 5,240 p Short 5,250 p Short 5,350 c Long 5,360 c | 20% | +375 | -130 |
Short Strangle | Short 5,250 p Short 5,350 c | 50% | +5,275 | x |
Short Put Vertical | Long 5,240 p Short 5,250 p | 63% | +162.50 | -325 |
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Symbol: Bonds | Daily Change |
/ZTM4 | +0.06% |
/ZFM4 | +0.23% |
/ZNM4 | +0.33% |
/ZBM4 | +0.79% |
/UBM4 | +1.01% |
Bonds yields fell across the curve today as rate traders continue to reprice markets to align with the Fed’s latest economic and inflation forecasts. There are no auctions left in the week from the Treasury and little event risk on the calendar until next week, which leaves the prevailing trend for more pressure on yields intact. The five-year T-note futures (/ZTM4) is up 0.23% at the opening bell.
Strategy (35DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 102 p Short 102.125 p Short 102.625 c Long 102.75 c | 28% | +156.75 | -93.75 |
Short Strangle | Short 102 p Short 102.125 p | 45% | +593.75 | x |
Short Put Vertical | Long 102 p Short 102.125 p | 88% | +78.13 | -171.88 |
Symbol: Metals | Daily Change |
/GCJ4 | -0.29% |
/SIK4 | +0.09% |
/HGK4 | -0.90% |
Gold prices are acting in a manner similar to equity markets, with traders taking a breather despite yields being down.
Still, gold (/GCJ4) remains near its recent all-time highs and holds near the 2,200 level. The stronger dollar, developed from a weak Australian dollar, Swiss franc and Chinese yuan, is likely holding the precious metals group back today.
Strategy (34DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 2,160 p Short 2,165 p Short 2,185 c Long 2,190 c | 13% | +430 | -80 |
Short Strangle | Short 2,165 p Long 2,185 p | 51% | +5,280 | x |
Short Put Vertical | Long 2,160 p Short 2,165 p | 70% | +170 | -330 |
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Symbol: Energy | Daily Change |
/CLJ4 | -0.25% |
/HOJ4 | +0.03% |
/NGJ4 | -0.82% |
/RBJ4 | +0.20% |
Crude oil prices (/CLJ4) were little changed this morning, down 0.25%, as negotiations between Israel and Hamas develop into something that could lead to a ceasefire, according to statements from U.S. Secretary of State Anthony Blinken.
Meanwhile, Russia and Ukraine continue to target each other’s energy infrastructure, marking an escalation in tactics.
Strategy (29DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 79 p Short 79.5 p Short 82 c Long 82.5 c | 20% | +380 | -120 |
Short Strangle | Short 79.5 p Short 82 c | 50% | +2,980 | x |
Short Put Vertical | Long 79 p Short 79.5 p | 60% | +190 | -310 |
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Symbol: FX | Daily Change |
/6AM4 | -0.68% |
/6BM4 | -0.38% |
/6CM4 | -0.32% |
/6EM4 | -0.39% |
/6JM4 | +0.30% |
The Australian dollar futures (/6AM4) fell against the dollar, which remains underpinned by this week’s Federal Open Market Committee (FOMC) decision that upgraded economic growth and inflation forecasts but kept its rate forecasts unchanged.
A steep drop in the yuan overnight may also be another driver for Australian dollar weakness, although the broader lull in risk taking is likely the driving factor. In any case, it looks like dollar strength is here to stay to end the week.
Strategy (42DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 0.64 p Short 0.645 p Short 0.66 c Long 0.665 c | 39% | +290 | -210 |
Short Strangle | Short 0.645 p Short 0.66 c | 56% | +860 | x |
Short Put Vertical | Long 0.64 p Short 0.645 p | 76% | +130 | -370 |
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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