Stocks Look to Close Eighth Straight Week of Gains
Stocks Look to Close Eighth Straight Week of Gains
Also 10-year T-note, gold, crude oil and euro futures
- Nasdaq 100 e-mini futures (/NQ): +0.25%
- 10-year T-note futures (/ZN): +0.17%
- Gold futures (/GC): +1.27%
- Crude oil futures (/CL): +1.11%
- Euro futures (/6E): +0.29%
The Santa Claus Rally window for stocks has opened (the last five trading days of the year and the first two of the new one).
Since 1950, the S&P 500 has rallied almost 80% of the time to an average gain of +1.4%. This year’s window is opening on bullish footing, as a decline in the Federal Reserve’s preferred gauge of inflation, the personal consumption expenditures (PCE) index, reaffirmed rate-cut bets in 2024. The drop in U.S. Treasury yields has filtered through into a weaker U.S. Dollar and stronger precious metals prices.
Symbol: Equities | Daily Change |
/ESH4 | +0.19% |
/NQH4 | +0.25% |
/RTYH4 | +0.41% |
/YMH4 | -0.16% |
Stocks move higher
Equity markets are slightly higher at the open in New York, encouraged by the latest inflation figures.
At the same time, earnings numbers from Nike (NKE) are casting some gloom over the market, with the stock down over 10% this morning following a weaker sales outlook update. The company’s outlook reflects broader economic concerns, but for now a soft landing looks like the most likely outcome for the economy.
Traders may not take on too much risk going into a long holiday weekend, which leaves prices susceptible to a pullback. Nasdaq 100 E-mini futures were up 0.23% at the open.
Strategy: (42DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 16500 p Short 16600 p Short 17400 c Long 17500 c | 34% | +1145 | -855 |
Long Strangle | Long 16500 p Long 17500 c | 43% | x | -6555 |
Short Put Vertical | Long 16500 p Short 16600 p | 68% | +525 | -1475 |
Symbol: Bonds | Daily Change |
/ZTH4 | +0.04% |
/ZFH4 | +0.09% |
/ZNH4 | +0.17% |
/ZBH4 | +0.50% |
/UBH4 | +0.59% |
10-year bond futures move up
10-year T-note futures (/ZNH4) caught a bid on Friday’s inflation report. The market is pricing in almost twice the number of rate cuts that the Federal Reserve forecasts. If data continues to support the more dovish outlook, that should help to drive yields lower.
For now, markets are looking at a potential period of little action until next year, given the U.S. holiday season and light economic calendar. Bond traders do have several auctions to watch next week, however, including auctions for two-year, five-year and seven-year notes.
Strategy (35DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 111 p Short 111.5 p Short 114.5 c Long 115 c | 47% | +234.38 | -265.63 |
Long Strangle | Long 111 p Long 115 c | 34% | x | -640.63 |
Short Put Vertical | Long 111 p Short 111.5 p | 78% | +125 | -375 |
Symbol: Metals | Daily Change |
/GCG4 | +1.27% |
/SIH4 | +0.79% |
/HGH4 | +0.10% |
Gold gains
Gold futures (/GCG4) also moved higher following this morning’s inflation report. The report showed prices fell in the United States for the first time since April 2020, according to the PCE index. That encouraged views that the Fed will start to cut early next year, which pushed Treasury yields lower to gold’s benefit.
However, that was the last big data print for the year out of the U.S. and markets are entering a period of reduced liquidity. But, for now, gold’s path of least resistance looks to be higher.
Strategy (34DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 2050 p Short 2055 p Short 2105 c Long 2110 c | 26% | +380 | -120 |
Long Strangle | Long 2050 p Long 2110 c | 39% | x | -4290 |
Short Put Vertical | Long 2050 p Short 2055 p | 66% | +220 | -280 |
Symbol: Energy | Daily Change |
/CLF4 | +1.11% |
/HOH4 | +0.13% |
/NGF4 | -1.10% |
/RBH4 | +1.63% |
Oil prices rise as Red Sea uncertainty remains
Crude oil prices (/CLG4) moved higher Friday as shippers continued to avoid the Red Sea amid uncertainty over how exactly a U.S.-led coalition would protect the vital shipping lane after Houthi rebels said they would attack more ships despite the military presence.
Meanwhile, Angola’s recent departure from OPEC is fueling concerns that the cartel will have trouble controlling prices.
Strategy (26DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 72 p Short 72.5 p Short 76.5 c Long 77 c | 72% | +350 | -150 |
Long Strangle | Long 72 p Long 77 c | 2% | x | -2760 |
Short Put Vertical | Long 72 p Short 72.5 p | 89% | +170 | -330 |
Symbol: FX | Daily Change |
/6AH4 | +0.23% |
/6BH4 | +0.28% |
/6CH4 | +0.26% |
/6EH4 | +0.29% |
/6JH4 | +0.16% |
Euro futures move higher
Euro futures (/6EH4) are looking to clear a key level of resistance from November, which marks the highest level traded since August. Broader weakness in the dollar due to this morning’s inflation report is helping to boost the European currency. The calendar is also light for European economic data until next year, which may leave prevailing sentiment in control.
Strategy (49DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1.08 p Short 1.085 p Short 1.125 c Long 1.13 c | 55% | +250 | -375 |
Long Strangle | Long 1.08 p Long 1.13 c | 30% | x | -662.50 |
Short Put Vertical | Long 1.08 p Short 1.085 p | 87% | +112.50 | -512.50 |
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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