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S&P 500 Returns to Weekly Gains after PCE as Holiday Weekend Looms

By:Christopher Vecchio, CFA

Also 30-year T-Bond, Gold, Crude Oil, and Japanese Yen Futures 


S&P 500, 30-year T-Bond, Gold, Crude Oil, Japanese Yen Futures 
S&P 500, 30-year T-Bond, Gold, Crude Oil, Japanese Yen Futures 

  1. S&P 500 E-mini futures (/ES): +0.4% 

  2. 30-year T-Bond futures (/ZB): 0% 

  3. Gold futures (/GC): -0.48% 

  4. Crude Oil futures (/CL): -2.19% 

  5. Japanese Yen futures (/6J): -0.5% 


The final week of summer is ending, and U.S. equity markets are attempting to wrap up the week near their August highs. The July U.S. personal consumption expenditures (PCE) index came in a touch softer than anticipated on the year-over-year readings, while the monthly rates were on the screws. Bonds are mixed across the curve as the odds of a Federal Reserve interest rate cut for the remainder of the year are unchanged. Elsewhere, continued U.S. dollar strength may be harming commodities, but not as much as the announcement from OPEC+ that the pre-scheduled boost in oil production would proceed as planned in October. 

Symbol: Equities 

Daily Change 

/ESU4 

+0.4% 

/NQU4 

+0.76% 

/RTYU4 

+0.32% 

/YMU4 

+0.22% 


U.S. equity markets are trading higher into the end of the week, retracing losses that accumulated rapidly yesterday in late trading. Economic data in recent days have suggested the U.S. economy is slowing, but still growing enough to keep intact the ‘soft landing’ narrative. Measures of volatility have come down across the board, with the spot VIX flirting with a break below 15 and the near-term volatility futures (/VX) curve back in contango.  

Strategy: (45DTE, ATM) 

Strikes 

POP 

Max Profit 

Max Loss 

Iron Condor  

Long 5350 p 

Short 5375 p 

Short 5975 c 

Long 6000 c 

66% 

+207.50 

-1042.50 

Short Strangle 

Short 5375 p 

Short 5975 c 

71% 

+1812.50 

Short Put Vertical 

Long 5350 p 

Short 5375 p 

88% 

+112.50 


E-mini S&P 500


Symbol: Bonds 

Daily Change 

/ZTZ4 

-0.08% 

/ZFZ4 

-0.09% 

/ZNZ4 

-0.07% 

/ZBZ4 

0% 

/UBZ4 

0% 


Bonds are barely changed today following the release of the July U.S. PCE index, even as the Fed’s preferred gauge of inflation came in at or below expectations. The lack of reaction across the curve suggests near-term rate cut odds are fully saturated. With four cuts discounted through the end of 2024, the question is whether or not the Fed will start its rate cut cycle in September with either a 25-basis-point (bps) or 50-bps rate cut; today’s data favors a 25-bps rate cut. 

Strategy (56DTE, ATM) 

Strikes 

POP 

Max Profit 

Max Loss 

Iron Condor  

Long 117 p 

Short 119 p 

Short 129 c 

Long 131 c 

63% 

+546.88 

-1453.13 

Short Strangle 

Short 119 p 

Short 129 c 

69% 

+1250 

Short Put Vertical 

Long 117 p 

Short 119 p 

84% 

+296.88 

-1703.13 


U.S. Treasury Bonds


Symbol: Metals 

Daily Change 

/GCZ4 

-0.48% 

/SIZ4 

-1.13% 

/HGZ4 

+0.09% 


The rejuvenated U.S. dollar has been a headwind for commodities in recent days, and the broad sweep of this week has seen both higher yields and a stronger greenback to the detriment of precious metals. If not a negative, the combined forces have certainly by an albatross of sorts that have slowed price gains. Nevertheless, gold prices (/GCZ4) were able to notch a fresh all-time closing high yesterday. September is usually a bad month for precious metals, it should be noted. 

Strategy (59DTE, ATM) 

Strikes 

POP 

Max Profit 

Max Loss 

Iron Condor  

Long 2380 p 

Short 2400 p 

Short 2700 c 

Long 2720 c 

66% 

+540 

-1460 

Short Strangle 

Short 2400 p 

Short 2700 c 

72% 

+2900 

Short Put Vertical 

Long 2380 p 

Short 2400 p 

86% 

+270 

-1730 


gold prices (/GCZ4)


Symbol: Energy 

Daily Change 

/CLZ4 

-2.19% 

/HOZ4 

-0.48% 

/NGZ4 

-1.03% 

/RBZ4 

-0.49% 


OPEC+ announced today it would indeed proceed with a planned production boost in October. Given the volatility in oil markets in recent months, largely centered around geopolitical concerns in the Middle East, there had been some speculation that OPEC+ would delay its production increase to provide stability to markets. Nevertheless, the confirmation of the production boost is contributing to another session of back-and-forth action in crude oil prices (/CLZ4).

Strategy (48DTE, ATM) 

Strikes 

POP 

Max Profit 

Max Loss 

Iron Condor  

Long 64 p 

Short 66 p 

Short 82 c 

Long 84 c 

65% 

+440 

-1560 

Short Strangle 

Short 66 p 

Short 82 c 

71% 

+1530 

Short Put Vertical 

Long 64 p 

Short 66 p 

80% 

+280 

-1720 


crude oil prices (/CLZ4)


Symbol: FX 

Daily Change 

/6AU4 

-0.26% 

/6BU4 

-0.2% 

/6CU4 

-0.11% 

/6EU4 

-0.11% 

/6JU4 

-0.5% 


The Japanese yen (/6JU4) is checking in on Friday as the worst performing major currency, although it doesn’t hold that title for the past week; that goes to the euro (/6EU4). The U.S. dollar rebound is gathering pace vs. the two largest components of the Dollar Index ($DXY), reinforcing the view that a near-term USD bottom has been achieved. Technically, /6EU4 broke its near-monthlong trend of closing above its one-week moving average, suggesting that upside momentum is finished near-term.

Strategy (70DTE, ATM) 

Strikes 

POP 

Max Profit 

Max Loss 

Iron Condor  

Long 0.0065 p 

Short 0.0066 p 

Short 0.0072 c 

Long 0.0073 c 

59% 

+375 

-875 

Short Strangle 

Short 0.0066 p 

Short 0.0072 c 

66% 

+1125 

Short Put Vertical 

Long 0.0065 p 

Short 0.0066 p 

88% 

+137.50 

-1112.50 


Japanese yen (/6JU4)



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

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro. 

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