S&P 500, 10-year T-Note, Gold, Natural Gas and Euro Futures

This Morning’s Five Futures in Focus

1. S&P 500 E-mini futures (/ES): -0.07%
2. 10-Year T-note futures (/ZN): -0.11%
3. Gold futures (/GC): -0.11%
4. Natural gas futures (/NG): -1.51%
5. Euro futures (/6E): -0.19%

A turnaround Tuesday may be in the works today, with nearly every single futures product trading in the opposite direction of where it closed on Monday. Efforts by the Chinese government to help prop up their equity markets may be working in the short-term, although a lack of positive response in China-proxies—crude oil (/CLV3), copper (/HGU3) and the Australian dollar (/6AU3)—suggests traders don’t believe any of the efforts undertaken thus far will ultimately solve China’s growth woes.

Ranges may be forming across the four major U.S. indexes, with the Russell 2000 (/RTYU3) as the lone exception, which already broke through last week’s high; a bottoming effort may be coming together in earnest. Otherwise, both the S&P 500 (/ESU3) and the Nadsaq 100 (/NQU3) seem stuck between the low set on Aug. 18 and the high established Aug. 24 in the very near-term. Lower volumes and a lack of meaningful macro events in the coming days portends an environment defined by sideways trading.

Bonds are weaker across the curve, but it’s shaping up to be a day of mild losses for U.S. Treasuries thus far. A lack of significant catalysts this week has traders searching for a reason to dislodge bonds from their current perch, which is to say “higher for longer” or at least “staying high for longer” remains the current mindset in the market. Once again, it’s the long-end of the curve that’s seeing the most movement, led by /ZBU3 and /UBU3.

Precious metals are subdued this morning ahead of U.S. jobs data set to cross the wires this morning. However, miners in Europe rose overnight after China announced further stimulus actions to support economic growth. The U.S. nonfarm payrolls report on Friday will likely offer gold and silver its next directional cue.

U.S. natural gas futures (/NGU3) are down slightly despite workers at two Chevron liquified natural gas (LNG) terminals in Australia voting to walk off the job to the picket lines starting Sept. 7, a move that will take around 5% of global LNG off the market. It is unclear how long the industrial action will last at the Wheatstone and Gorgon sites in Western Australia, but the longer it goes on, the more volatile energy markets will likely be, especially going into the Northern Hemisphere’s winter withdrawal season.

Elsewhere, traders are watching today’s inventory data from the American Petroleum Institute (API), due at 16:30 EST. Analysts expect a 2.9 million barrel draw for the week ending Aug 25..

Global growth concerns continue to swirl, leading to speculation that many of the world’s major central banks will be forced to back off their fight against inflation and instead turn the monetary policy levers from rate hikes to rate cuts. That is, all central banks but for the Federal Reserve. The widening gap in near-term policy expectations is helping to keep the U.S. dollar afloat, with the DXY Index adding +0.33% on the session.

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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