S&P 500 Takes Aim at 6000; Natural Gas Prices Plunge

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

1. S&P 500 E-mini futures (/ES): -0.12% 
2. 10-year T-note futures (/ZN): +0.16% 
3. Gold futures (/GC): +0.78% 
4. Natural gas futures (/NG): -4.52% 
5. British pound futures (/6B): -0.49% 

The sun is setting on the trading week, and today’s price action is relatively benign (both in terms of price ranges and absolute change) in U.S. equity markets, where no major index is +/- 0.3% on the day. Bonds are perking up across the curve, thanks in part to deflating inflation expectations amid a sharp turnaround in energy prices. Natural gas, which was up by more than 22% week-to-date yesterday, is now up by just over 8% this week. Elsewhere, the U.S. dollar continues to gather pace vs. its European counterparts; EUR/USD (both in spot and in futures) is closer to parity than it is to its exchange rate at the start of November. 

U.S. stocks are relatively quiet on today, a bit of a hangover, if you will, after Nvidia (NVDA) and Snowflake (SNOW) earnings on Wednesday that helped spark a leg higher in software and semiconductor stocks. The Russell 2000 (/RTYZ4) is walking away from the week as the top performer, although the S&P 500 (/ESZ4) is on pace for its second-highest weekly close ever.

U.S. Treasuries have made little directional progress since the election, and in that context today’s gains across the curve mean very little. Neither 10-year notes (/ZNH5) nor 30-year bonds (/ZBH5) have closed above or below the trading range that was carved out on Nov. 6. Fed rate cut odds have edged higher, with traders discounting a 59.6% probability of a 25-basis-point (bps) rate cut in December. 

Gold prices (/GCG5) are extending their gains for a sixth consecutive session, erasing more than half the losses that accumulated in the first half of the month (which marked the worst two-week stretch for gold since March 2020). While /GCG5 has exhibited signs of improved technical posture by trading above both its one-week and one-month moving averages, silver prices (/SIH5) have no such clarity thus far, remaining trapped between their one-week and one-month moving averages. 

Natural gas prices (/NGF5) have had a rollercoaster week, gaining overn22% at one point before crashing back to earth: /NGF5 is up by just over 8% week-to-date, a dramatic turn from this time yesterday. Evolving geopolitical concerns in Eastern Europe plus a shift in NOAA’s temperature forecast for the lower 48 states have proved vital catalysts in recent days, and that’s likely to continue into the holiday-shortened week. 

If only to underscore the problems facing the European currencies, on a day when U.S. Treasury yields are lower and energy prices are lower, both the British pound (/6BZ4) and the euro (/6EZ4) are leading the major currencies to the downside. These are pure bearish momentum plays at the moment (in other words, there’s no reason to try to sell puts to call the low absent technical evidence), with continued persistence of aggressively oversold readings across myriad indicators. 

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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