Top things to watch this week
The Economic Calendar:
MONDAY: PMI Manufacturing, ISM Manufacturing Index, Construction Spending, 3-Month Bill Auction, 6-Month Bill Auction
TUESDAY: Motor Vehicle Sales, JOLTS, 52-Week Bill Auction
WEDNESDAY: MBA Mortgage Applications, ADP Employment Report, PMI Composite, Factory Orders, ISM Services Index, EIA Petroleum Status Report, 4-Month Bill Auction
THURSDAY: Challenger Job-Cut Report, International Trade in Goods and Services, Jobless Claims, EIA Natural Gas Report, 4-Week Bill Auction, 8-Week Bill Auction, Fed Balance Sheet
FRIDAY: Employment Situation, Baker Hughes Rig Count, Consumer Credit
- U.S. government shutdown averted over the weekend.
- The key economic release will be the U.S. jobs report on Friday.
- Light economic calendar with jobs report and ISM.
- OPEC+meeting mid-week, no major changes to the oil output are anticipated.
- Central bank speakers include Fed Powell, Harker, and Williams.
- ECB President Lagarde presents views in a speech.
- The BoJ’s Summary of Opinions and BoE’s DMP survey.
- UAW strike continues.
STOCK INDEX FUTURES
Traders decided there were too many negative factors in September – the UAW strike, US Government shutdown, high crude oil prices, and higher interest rates for longer. Stocks finished lower for the month, with S&P 500 down -5.22% and Nasdaq-100 down -4.93%.
The only winning sector in September was Energy stocks, +1.72%. The worst sectors were Real Estate -8.9%, Utilities -7.3%, Industrials -6.75%, and Technology -6.22%.
Looking forward, we are in a period of dormant stock buybacks. Approximately 84% of the S&P 500 are in their blackout period, with roughly 90% anticipated to be in blackout by the week’s end. Goldman Sachs projects the blackout period to conclude around 10/20/23.
INTEREST RATE FUTURES
The sell-off continues in U.S.10 and 30-year treasury bonds. The 10-year yield reached our profit target, but we still prefer a core short with reduced size. The trend is stretched, and a 20-30 basis point correction is possible.
Many traders are now trading the cutting cycle (2024) instead of the hiking cycle. We are near the end of hikes, at least for now.
The Fed Fund Futures markets are pricing the fewest cuts by the end of 2024. The market is pricing in the July 31 Fed meeting with the highest chance of an interest rate cut.
The November 1 FOMC meeting now has an 81.7% probability of no rate change.
Traders look to this week’s Organization of the Petroleum Exporting Countries and allies for further clues on tight global energy supplies.
Oil futures prices have been trending higher, with oil prices up 6.8% on the month. This was driven by a combination of factors, including lower-than-expected oil inventories.
Russia and Saudi Arabia have been working together to support the oil market between $80 and $100 per barrel.
However, it is unclear whether they will be able to maintain this support if oil prices go above $100 per barrel. This is because the U.S. presidential election is approaching, and both countries may be reluctant to see oil prices rise too high.
If oil prices rise above $100 per barrel, it could lead to several negative consequences, including higher inflation, higher interest rates, and financial turmoil. However, the downside risk to oil prices may be limited.
This is because there are a number of factors that could support oil prices at lower levels, such as OPEC+ cuts, higher coal production costs in China, and the likely refill of the US Strategic Petroleum Reserve.
USD/jpy AND JGB FUTURES
This week’s BoJ Summary of Opinions will likely serve as a reminder of the reluctance of the BoJ to move swiftly on abandoning unconventional policies.
Many forecasts call for higher JGB yields for Q1 2024; 10-year JGB at 1.25% and peak USD/JPY at 155.
BITCOIN AND ETHEREUM FUTURES
The floodgate has opened with the approval of Ethereum (ETH) futures ETFs.
This week, the NYSE will list the ProShares Ether Strategy ETF (NYSE Arca: EETH), the ProShares Bitcoin & Ether Market Cap Weight Strategy ETF (NYSE Arca: BETH), and the ProShares Bitcoin & Ether Equal Weight Strategy ETF (NYSE Arca: BETE) on Monday.
The Arca platform will also begin trading the Bitwise Ethereum Strategy ETF (NYSE Arca: AETH) and the Bitwise Bitcoin and Ether Equal Weight Strategy ETF (NYSE Arca: BTOP).
On the spot market ETF side, the SEC delayed decisions on the Global X, Valkyrie, BlackRock, Invesco, and ARK 21Share spot Bitcoin ETF applications.
This marks the third extension for Ark 21 Shares, the second for Valkyrie, and the first for Global X. Decisions are due on January 10, January 15, and November 21, respectively.
Seven other Bitcoin ETF applications, including the Invesco Galaxy Bitcoin ETF, await decisions between mid-October and late-November.
Reports of optimism from Beijing about a possible year-end summit between Xi Jinping and Joe Biden, coupled with discussions about a possible trip to Washington by Vice Premier He Lifeng, suggest that the two sides may be moving closer to a meeting.
Given the strained state of US-China relations, a summit between Xi and Biden would be a significant development. The two leaders have not met in person since November 2021, and relations have deteriorated over issues such as trade, Taiwan, and human rights.
A summit could allow the two sides to discuss their differences and explore ways to manage their rivalry more effectively. It could also help to reduce tensions and avoid a more serious conflict.
It is important to note that there are still significant obstacles to a summit. Both sides have their own red lines, and it is unclear whether they will be able to find common ground on key issues. However, the fact that both sides are reportedly discussing a meeting is a positive sign.
This performance chart tracks the daily, weekly, monthly, and yearly changes of various asset classes, including some of the most popular and liquid markets available to traders.
All content published and distributed by Topstep LLC and its affiliates (collectively, the “Company”) should be treated as general information only. None of the information provided by the Company or contained herein is intended as (a) investment advice, (b) an offer or solicitation of an offer to buy or sell, or (c) a recommendation, endorsement, or sponsorship of any security, Company, or fund. Testimonials appearing on the Company’s websites may not be representative of other clients or customers and is not a guarantee of future performance or success. Use of the information contained on the Company’s websites is at your own risk and the Company, and its partners, representatives, agents, employees, and contractors assume no responsibility or liability for any use or misuse of such information.
Futures trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the investor’s initial investment. Only risk capital—money that can be lost without jeopardizing one’s financial security or lifestyle—should be used for trading, and only those individuals with sufficient risk capital should consider trading. Nothing contained herein is a solicitation or an offer to buy or sell futures, options, or forex. Past performance is not necessarily indicative of future results.
CFTC Rule 4.41 – Hypothetical or Simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, because the trades have not actually been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs, in general, are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.