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May 19, 2023
World equity indices cash and US index futures
In Asia, Japan’s Nikkei (+0.77%) closed at a 33-year high; South Korea’s Kospi (+0.89%) gained again to close at session highs. Alternatively, the Shanghai Comp (-0.42%) teetered in directionless trade, while the Hang Seng (+1.40%) fell to a two-month low. In Europe, the DAX (+0.54%) surged higher, extending its challenge to historic highs, while the FTSE (+0.13) remained within its recent weekly range. As western sunrise began, traders were greeted with flat to higher call and positive sentiment.
June 2023 Mini S&P sequel
The mini-Nasdaq’s continued outperformance remains impressive as it is on track to post a weekly gain of around 4%; Still, it’s the Min-DJI’s poor performance that worries me. Every time I look at its chart, I can’t shake the downtrend from the December highs and wonder if this is a reflection of a broader economic slowdown. As I go further, I’ll slip into the narrative, so I’ll try to stop there. However, I will counter that with the much broader S&P heading for a 3-month high and challenging the top end of a broad sideways trading range stretching back to last year. Remember that these patterns always look great on top and horrible on the bottom. Let’s see how it goes.
Fixed Income Securities
June 2023 30 year continuation
The entire complex was under pressure this week, beginning with a collapse in 30-year broadcast that is now affecting the belly of the curve. In addition to the lack of safe-haven bids related to banking and debt ceiling concerns, economic numbers have not turned negative across the board and narratives have now shifted towards another rate hike in June. As mentioned in previous newsletters, prices (and yields) have changed significantly in a short period of time (as a result of the banking crisis) and there is a risk of corrections. Attractive yields will provide a temporary counterbalance, but do not give reason to increase aggressiveness.
cash currencies
USDJPY cash
It’s an interesting reversal for the USD as it is under pressure (higher yields) despite a bearish bond complex. For now, I would attribute this to a minor correction in this week’s gains. The whole complex is potentially nearing an interesting crossroads in tone as the global central bank rate-hike cycle hits perceived “late innings”. USDJPY remains the most interesting as the ‘game’ hasn’t even started here. The price at the same time satisfies the long positions with a near challenge of 139.00 but also creates the same dissatisfaction for the macro shorts, adding to the trend.
precious and base metals
July 2023 HG Copper sequel
USD weakness has led to increased demand for precious metals, which have come under pressure. The current correction will test the resolve of safe-haven investors and the complex is now in a similar situation to forex trading. Is this just a temporary pause in recent longer-term trends, or have they had an impact and could start to roam aimlessly and violently, risking larger reversals? There is scope for deeper corrections without hurting larger trends, so things can get tough for a while. As for HG Copper, it is higher with broader development and raw material strength; Accelerating downside momentum might finally slow as the price remains at weekly lows. There may be a window for a rebound but I cannot escape the risk of another downtest weighed down by global growth concerns.
energy
June 2023 Natural Gas continued
Crude Oil ($72.90) and products all rise, rising along with broader commodity supply on USD weakness; Two-week highs/lows are the levels to watch as prices remain right in the middle of this range. The spread curve is mixed, pressured near by while fall/winter spreads are bidding. The products rise in unison, with the distillate performing better on a flat curve. However, I will continue to keep a close eye on the recent trend of RBOB outperforming as the high-demand season begins. Natural gas adds to recent gains, trading at $2.60 and attracting further interest in bottom selection. Along the curve, supply interest shifted from late winter to fall/early winter spreads; I’ll keep an eye on that.
Agriculture
July 2023 Corn Daily
No wonder, because the complex is growing along with the wider supply of raw materials. The price was utterly devastated by selling, a combination of long liquidation and speculative short positions in both corn and soybeans. I’m not sure the momentum acceleration can continue at the current pace, but these trends (which yesterday were mislabeled as corrections) need to run their course. Nearby spread weakness in both corn and soybeans has paused but still shows large premiums. As for the wheat, its recent attempt to build a trend past the lows failed, sending prices back to zero.
crypto futures
May 2023 Micro BTC sequel
Both BTC ($27.00) and ETH ($1,820) continue to trade around recent lows; It’s an impressive stop for the complex and might inspire enough confidence for another run up; Still, I’m not sure if they’re over the hill yet.
Good luck today and have a great weekend!
John
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Trading futures and options involves risk of loss. Please consider carefully whether futures or options are appropriate for your financial situation. Only venture capital should be used when trading futures or options. You must review your broker’s client account agreement before setting up an account. Investors could lose more than their original investment. The risk of loss when trading can be significant. Therefore, carefully consider the risks associated with such an investment in relation to your financial situation. All opinions, news, research, analysis, prices or other information contained in this newsletter is for general market commentary and informational purposes and does not constitute investment advice. These views are my own and do not reflect the views or viewpoints of any affiliated company or group .
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