Nasdaq 100 Starts Final Full Week of Year at All-Time Highs

Also, 10-year T-note, gold, crude oil and Japanese yen futures

1. Nasdaq 100 E-mini futures (/NQ): +0.54% 
2. 10-year T-note futures (/ZN): +0.13% 
3. Gold futures (/GC): +0.12% 
4. Crude oil futures (/CL): -0.38% 
5. Japanese yen futures (/6J): -0.32% 

It’s the final full trading week of 2024, and investors are busy rallying risk assets ahead of the holidays. Of note, spot Bitcoin has moved comfortably above $100,000 after Microstrategy (MSTR) was added to the Nasdaq 100 in the latest round of rebalancing. Masayoshi Son’s Softbank has announced it will invest $100 billion into the U.S. economy during the next Trump term, helping provide new legitimacy to the AI narrative. Elsewhere, the ongoing stretch of higher Treasury yields continues to support the U.S. dollar. 

The Nasdaq 100 (/NQH5) is leading the charge higher at fresh all-time highs in the wake of the news that Softbank would be making a significant investment into the U.S. economy under the Trump administration. The investment will be geared specifically toward jobs in AI, from software engineers to infrastructure build-out. The topline strength in the indexes is curious, however: The S&P 500 (/ESH5) has seen negative breadth (more stocks declining than advancing) every trading session in December. 

Treasuries have been slumping across the curve for the past week, and the rebound today could represent the first uniformly green day since Dec. 6. That said, technical damage has accumulated despite a raft of data and Treasury auctions that would suggest traders are comfortable on the long side of the trade. The Federal Reserve rate decision on Wednesday is the top event risk for notes (/ZNH5) and bonds (/ZBH5) in the coming days.

An ugly Thursday-Friday erased the bullish breakout that gold prices (/GCG5) attempted last week, bringing it back within the confines of a symmetrical triangle—and likewise revitalizing the potential for a head and shoulders pattern. Disparagingly for bulls, volatility has started to decline once more (IVR now 58.8, down from 72.1 on Dec. 11). A reconstituted technical view suggests more chop could be the path of least resistance over the next month. 

For all the back-and-forth price action in energy markets in recent weeks, not much progress has been made directionally in either crude oil (/CLG5) or natural gas (/NGF5) prices. For the latter, the trading range between 66 and 72 has persisted for the better part of two-months now; volatility is beginning to climb (IVR now 29.2, up from -1.6 on Dec. 9), suggesting a breakout may soon transpire. 

The week-long run of higher Treasury yields has proved beneficial for the U.S. dollar, and the biggest loser has been the Japanese yen (/6JH5). This week, /6JH5 may be the most volatile major currency, as it sits at the crossroads of two of the major macro events this week: the Federal Reserve rate decision on Wednesday and the Bank of Japan (BOJ) rate decision on Thursday. An end to the Fed cut cycle over the coming months may provoke the BOJ to raising rates to prevent rate differentials from further undermining the yen. 

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

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