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Market News Posted by John Doherty June 2, 2024

OPEC+, Payroll Numbers, and Tips For Getting Better!


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Top things to watch this week

The Economic Calendar:

MONDAY: S&P Global Manufacturing PMI Final (8:45a CT), Construction Spending (9:00a CT), ISM Manufacturing Index (9:00a CT)

TUESDAY: Redbook (7:55a CST), Factory Orders (9:00a CT), JOLTS (9:00a CT), Vehicle Sales (9:00a CT)

WEDNESDAY:  MBA Morgage Applications (6:00a CST), ADP Employment Change (7:15a CT), S&P Global Composite PMI Final (8:45a CT), ISM Services Index (9:00a CT), EIA Petroleum Status Report (9:30a CT)

THURSDAY: Challenger Job Cuts (6:30a CT), Balance of Trade (7:30a CT), Import/Export Prices (7:30a CT), Jobless Claims (7:30a CT), EIA Natural Gas Report (9:30a CT)

FRIDAY: May Jobs Report (7:30a CT), Used Car Prices (8:00a CT), Wholesale Inventories (9:00a CT), Baker Hughes Rig Count (12:00p CT), Consumer Credit Change (2:00p CT)


Key Events:

  • OPEC+ decision on supply/demand for Sunday night open.
  • The Payroll and Unemployment data on Friday is ‘Top of Mind.’
  • Fed speak blackout period June 1-13.
  • Economic data on ISM, Jolts Job Openings, Payrolls, and Jobs.
  • ECB interest rate decision on June 6.
  • Nvidia (NVDA) 10-for-1 stock split that becomes effective after the close on Friday.
  • Traders are looking forward to the FOMC decision on June 11 and U.S. CPI (inflation) data on June 12.

STOCK INDEX FUTURES

May brought a welcome turnaround for the stock market after a rough April. The S&P 500 climbed 5.4% for the month, while the Nasdaq 100 surged even higher with a 6.9% gain. Both indexes even reached record highs by mid-May, fueling investor optimism.

However, the rally wasn’t without its jitters. In the latter part of the month, concerns about persistent inflation, a potential economic slowdown, and lofty stock valuations caused the market to pull back.

Despite the positive momentum, some analysts sounded cautionary notes, highlighting lingering economic headwinds that could impact future market performance.

Sector Performance Highlights for May:

  • Technology (XLK): Up 8.18% in May. This sector outperformed the market, possibly due to continued strength in certain technology stocks.
  • Utilities (XLU): Up 7.72% in May. Similar to the previous analysis, this could be due to investors racing toward the power demand issue of the AI subsector.
  • Energy (XLE): Up 1.27% in May. Oil futures prices were down, but energy stocks continued positive performance.
  • Consumer Discretionary (XLY): Down 0.83% in May. Consumer spending concerns might be behind this sector’s underperformance.

 

Stock Sector Performance Summary 06-02-2024


INTEREST RATE FUTURES

The Federal Reserve may need to consider the traders’ aggressive stance on interest rates in the SOFR options market.

The SOFR options market is heavily skewed towards expectations of higher rates, with significant changes in open interest reflecting traders’ strategic positioning.

This suggests that the market is underestimating a hawkish turn, as the previously expected significant easing cycle in 2024 seems unlikely.

While core PCE inflation met expectations in May (reported last week), the lack of disinflation and the hawkish signal from the options market point toward potential future volatility.

Overall, the data validates short-term inflation forecasts, but the market’s repricing and options activity raise concerns about the Fed’s need for a more forceful approach to controlling inflation.

SOFR Options Trades 06-02-2024


COMMODITY FUTURES

While many commodities have experienced a strong rally in 2024, analysts at Goldman Sachs believe there are still trade opportunities and upside within the sector. Copper, gold, and oil appear to be the most promising options.

Copper stands out due to dwindling supplies of cheaper alternatives. We anticipate a significant price increase, with copper reaching $12,000 per tonne ($5.44 a pound) by year-end, reflecting a 15% upside. Copper futures at the CME settled at $4.6275 a pound.

Gold’s outlook is also positive, driven by consistent demand from emerging market central banks and Asian buyers. By year-end, we project gold prices to climb to $2,700 per troy ounce. Gold futures at the CME settled at $2347 an ounce.

Brent crude oil prices will likely stay within the $75-$90 per barrel range we established previously. However, we still view oil as a valuable asset due to its positive roll yield and its role as a hedge against geopolitical instability.


crude oil FUTURES

Energy traders will focus on the results of the OPEC meeting over the weekend.

A poll of 41 analysts and economists surveyed by Reuters in the last two weeks saw Brent crude averaging $84.01 per barrel in 2024 with U.S. crude at $79.56 – down from April forecasts of $84.62 and $80.46, respectively.


GEOPOLITICAL

The Wall Street Journal reported that ‘in a significant policy reversal, the Biden administration on Thursday said for the first time that it would allow Ukrainian forces to do limited targeting with American-supplied weapons inside Russia.

The new policy will allow Ukrainian forces to use artillery and fire short-range rockets from Himars launchers against command posts, arms depots, and other assets on Russian territory that are being used by Russian forces to carry out its attack on Kharkiv in northeastern Ukraine.

However, the policy doesn’t permit Ukraine to use longer-range ATACMS surface-to-surface missiles inside Russia.


BITCOIN FUTURES

Do Mt. Gox bankruptcy creditors Hold or SELL their bitcoin (BTC)?

On Tuesday, May 27, Mt. Gox transferred BTC from their cold wallets for the first time in over five years. The bankrupt Tokyo-based Bitcoin exchange transferred the full 141,868 BTC balance (~$9.7bn) to a new BTC crypto address – 1Jbez…APs6…

With the long-awaited payments to creditors from the Mt. Gox bankruptcy, traders are speculating on what percentage of the distributed coins will be sold upon payment and how the sell pressure will impact BTC prices.

Despite the market’s limited understanding of the complexities involved in the Japanese bankruptcy process, initial reactions to the recent Mt. Gox developments seem to overestimate the volume of sell pressure from creditors. We will see…


LEARNING AND GETTING BETTER

Discipline: Outperformers do what they must, even when they don’t feel like doing it.

  • I will journal my trades
  • I will respect my stop losses
  • I won’t take random trades
  • I will follow my playbook
  • I will review my trades daily
  • I will improve and enhance my daily process

Asset class performance sheet

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.

Asset Class Performance Summary


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