Crypto, VIX, Rates, Equities, Silver, and Natural Gas Futures

Top things to watch this week

The Economic Calendar:

MONDAY: PRESIDENT’S DAY HOLIDAY – CME GROUP MARKETS CLOSE AT 12:00P CT, Fed Harker Speech (8:30a CT), Fed Bowman Speech (9:20a CT), Fed Waller Speech (5:00p CT)

TUESDAY: Empire State Manufacturing Index (7:30a CT), NAHB Housing Market Index (9:00a CT), Fed Daly Speech (9:20a CT), NOPA Crush Report (11:00a CT), Fed Barr Speech (12:00p CT), Foreign Bond Investment (3:00p CT), Net Long-Term TIC Flows (3:00p CT), Overall Net Capital Flows (3:00p CT)

WEDNESDAY:  MBA Mortgage Applications (6:00a CT), Building Permits (7:30a CT), Housing Starts (7:30a CT), Redbook (7:55a CT), 20-Year Bond Auction (12:00p CT), FOMC Minutes (1:00p CT), Fed Jefferson Speech (4:00p CT)

THURSDAY: Jobless Claims (7:30a CT), Philly Fed Manufacturing Index (7:30a CT), Fed Goolsbee Speech (8:35a CT), CB Leading Index (9:00a CT), EIA Natural Gas Report (9:30a CT), EIA Petroleum Status Report (11:00a CT), Fed Musalem Speech (11:05a CT), Fed Barr Speech (1:30p CT), Fed Balance Speech (3:30p CT), Fed Kugler Speech (4:00p CT)

FRIDAY: S&P Global Composite PMI Flash (8:45a CT), Existing Home Sales (9:00a CT), University of Michigan Consumer Sentiment (9:00a CT), Fed Jefferson Speech (10:30a CT), Baker Hughes Rig Count (12:00p CT)

Key Events:

• The President’s Day holiday and markets closed on Monday.
• Russia and Ukraine’s deal to stop the War is in the works.
• Traders are watching the busy FOMC speaker schedule this week, which includes Harker, Bowman, Waller, Jefferson, Daly, Kugler, and Barr.
• Lite week for economic data with Housing data, Home Sales, and FOMC Minutes.
• Notable earnings reports from Walmart, Alibaba Group Holding, Medtronic, Occidental Petroleum, and Analog Devices.
• Gold, Silver, U.S. Dollar, and Natural Gas.

STOCK INDEX FUTURES

The S&P 500 and Nasdaq 100 are looking for new highs. The S&P 500 is up 3.65%, and the Nasdaq 100 is higher by 4.37% on the year.

Markets are defying expectations, with stocks and bonds rallying despite recent FOMC and BLS (employment) data that would typically trigger a downturn. This unusual resilience may be attributed to several factors:

• Concentrated Investments: A significant portion of assets under management is concentrated in a small number of stocks, controlled mainly by a few key players. This concentration limits the impact of broader market trends on these specific stocks, contributing to overall market stability.
• Political Pressure on the Fed: Further Fed rate hikes seem unlikely with the current political climate. Political pressure to keep rates low significantly influences the central bank’s actions. This dynamic creates a supportive environment for risk assets.
• Trade Policy Developments: Recent trade announcements, including tariffs on steel and aluminum imports, have introduced additional uncertainty into the market. While the long-term impact of these measures remains to be seen, the market is taking a wait-and-see approach. The administration has also indicated a willingness to consider reciprocal tariffs on a country-specific basis, suggesting further trade-related news flow is likely.

INTEREST RATE FUTURES

Last week, yields on 10-year Treasuries spiked up 10 basis points (bp) and then dropped 18 bp. They finished the week lower than where they started, at 4.46%.

January’s core inflation surged 0.4%, the highest jump since March, reinforcing the Federal Reserve’s cautious approach to rate cuts. Headline CPI rose 3% year-over-year, primarily fueled by shelter costs.

Traders are now pricing in only one Fed rate cut this year, down from previous expectations of two. The inflation data led Fed futures to modestly increase bets on easing this year, shifting the likely timing of the next cut to September from October.

Chairman Powell reiterated this week that the Fed is in no hurry to ease rates, citing a need for more clarity on the administration’s policies, particularly tariffs, which are already boosting consumer inflation expectations.

Source: CME Group

SILVER FUTURES & SLV ETF OPTIONS

Silver futures have been influenced by the microstructure of the SLV ETF. Futures traded as high as $34.15/oz on Friday morning before closing at $32.65 and avoiding a massive short squeeze in SLV ETF.

Here are further details on the recent activity and specifics of silver options on the SLV ETF (iShares Silver Trust):

Recent Option Activity:

• High Short Interest: A significant increase in short interest for SLV has been noted, with short interest volumes exceeding 72% for SLV. This indicates a high level of bearish bets on the ETF, which could lead to volatility if these positions need to be covered.
• Option Expirations: A notable event was the expiration of 47,000 in-the-money (ITM) call options on SLV, which could have forced option sellers to create or manage around 4.7 million shares to fulfill these obligations. This scenario suggests intense activity around these options, potentially leading to price movements or squeezes in the silver market.
• Borrowing Fees and Availability: Recent posts highlight that the borrowing fee for shorting SLV has escalated dramatically, with fees going vertical. Furthermore, the shares available to borrow have significantly decreased to only about 100,000 shares from 10 million just days prior. This scarcity can amplify the cost and difficulty of maintaining short positions, potentially leading to a short squeeze.

Source: TradingView

VIX FUTURES

Despite a week rife with market-moving headlines and volatility surrounding U.S. policy, coupled with emerging concerns about the sustainability of the AI investment boom, the VIX (volatility index) closed the week notably lower, around 15.1.

This level represents a significant decrease from both the start of last week and the beginning of the year, suggesting that investors, despite the prevailing uncertainties, are taking market developments in stride.

The VIX futures curve currently displays a steep contango, with substantial spreads between near-term and longer-dated contracts, signaling market anticipation of heightened volatility further out.

Front-month volatility has collapsed due to pervasive uncertainty, which has eroded conviction in prevailing market narratives, leading to a standstill in trading activity.

Conversely, back-end volatility has risen for the same reason – the uncertainty has traders seeking protection further out.

Source: Bloomberg

NATURAL GAS FUTURES

Natural gas prices recently surged, reaching the upper Bollinger Band before retreating slightly, driven by renewed concerns over winter weather.

Forecasts suggest the cold weather pattern may extend into March or April, significantly altering the natural gas supply outlook and potentially ending the recent glut.

The Energy Information Administration (EIA) has revised its natural gas price forecasts upward, now projecting an average Henry Hub price of $3.80 per million British thermal units (MMBtu) in 2025, a 21% increase from its previous estimate. The EIA also adjusted its 2026 forecast to $4.20/MMBtu, up from $4.00. The Henry Hub spot price averaged $4.13/MMBtu in January, compared to $3.01/MMBtu in December.

US DOLLAR FUTURES

The U.S. dollar, typically a beneficiary of recent tariff threats, retreated against major currencies, including the euro, yuan, Canadian dollar (reaching two-month lows), and Mexican peso (hitting 10-day lows).

This decline occurred despite a hot consumer price inflation report earlier. The dollar’s weakness can be attributed to a subsequent producer price report that painted a less inflationary picture, effectively reversing the spike in Treasury yields that followed the CPI release.

BITCOIN CRYPTO FUTURES

Watch the front run…

JP Morgan Chase analysts estimate that proposed U.S. stablecoin regulations could force stablecoin Tether to restructure a significant portion of its reserves.

The analysts’ assessment suggests only 66% to 83% of Tether’s current holdings comply with the proposed STABLE Act and GENIUS Act, respectively.

Passage of either bill could compel Tether to liquidate substantial holdings of Bitcoin and other non-compliant assets, such as precious metals, in favor of U.S. Treasuries and other permissible liquid reserves.

Tether’s bitcoin holdings currently total approximately 83,758 coins, valued at over $8 billion.

asset class performance summary

These performance charts track the daily, weekly, monthly, and yearly changes of various asset classes, including some of the most popular and liquid markets available to traders.

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