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The Economic Calendar:
MONDAY: Consumer Inflation Expectations (10:00a CT), WASDE Report (11:00a CT), Monthly Budget Statement (1:00p CT)
TUESDAY: NFIB Business Optimism Index (5:00a CT), PPI (7:30a CT), Redbook (7:55a CT), Raphael Bostic Speaks (12:15p CT)
WEDNESDAY: MBA Mortgage Applications (6:00a CT), CPI (7:30a CT), Inflation Rate (7:30a CT), EIA Petroleum Status Report (9:30a CT
THURSDAY: Jobless Claims (7:30a CT), Import/Export Prices (7:30a CT), Empire State Manufacturing Index (7:30a CT), Philly Fed Manufacturing Index (7:30a CT), Retail Sales (7:30a CT), Alberto Musalem Speaks (8:10a CT), Industrial Production/Capacity Utilization (8:15a CT), Manufacturing Production (8:15a CT), Business Inventories (9:00a CT), NAHB Housing Market Index (9:00a CT), Retail Inventories (9:00a CT), EIA Natural Gas Report (9:30a CT), NOPA Crush Report (11:00a CT), Patrick Harker Speaks (12:10p CT), Fed Balance Sheet (3:30p CT)
FRIDAY: Building Permits (7:30a CT), Housing Starts (7:30a CT), University of Michigan Consumer Sentiment (9:00a CT), Baker Hughes Rig Count (12:00p CT), Austan Goolsbee Speaks (12:25p CT)
Key Events:
I’ll repeat this classic options volatility trading mantra:
If you’re short Vol, you make money…but eventually die. But if you’re long Vol, you die before you make money.
Traders are experiencing a period of heightened volatility and uncertainty, with significant implications for options traders and market makers. The VIX options market has experienced a liquidity crisis, exacerbating losses for many market participants.
Here’s our take:
Despite the sharp initial week decline, the S&P 500 closed the week with minimal losses—only 2 points down.
Traders maintain a cautious stance due to potential negative seasonality, geopolitical risks, and the possibility of further market weakness.
Some analysts believe the recent decline was a technical correction rather than a fundamental shift in market conditions. Some characterize the selloff as a “Growth Scare,” which may have been a convenient way to describe the unwind of the carry trade and subsequent forced selling.
August and September are typically weak performance months in the year before giving way to Q4, the best quarter of the year. During election years, that negative seasonality can extend into October, given the policy uncertainty.
Nomura thinks big money manager selling could happen to the downside around S&P500 5152 in the S&P 500.
INTEREST RATE FUTURES
Traders look forward to this week’s CPI report and the Fed’s Jackson Hole conference on August 22.
The market is anticipating a significant interest rate cut of 50 basis points by the Fed in September. However, recent economic data suggests a smaller 25-basis-point cut might be more likely.
This discrepancy between market expectations and potential Fed actions could lead to market volatility, especially if the Fed signals a more hawkish stance than anticipated at the Jackson Hole symposium.
Additionally, JPMorgan CEO Jamie Dimon has expressed skepticism about the Fed’s ability to achieve its 2% inflation target and warned against overreacting to short-term market fluctuations.
Source: TradingView
Market participants are awaiting the USDA WASDE report on Monday, which will provide updated estimates on corn and soybean stocks and yield for both the old and new crops.
For corn, current expectations suggest that old-crop corn stocks will remain unchanged, while new-crop stocks might see a slight increase. The new crop yield estimate carries a wider range than the old crop, indicating higher uncertainty.
Most analysts are expecting an increase in yields.
After a recent pullback, gold futures prices are expected to recover, and some analysts think they will reach a peak of $2,450 per ounce in the fourth quarter. While short-term volatility is possible, the overall trend remains bullish.
Key factors to watch:
Crude oil prices have been highly volatile, fluctuating wildly due to conflicting forces. On Friday, WTI crude oil futures closed at $76.84.
On one hand, China, the world’s largest oil importer, is showing signs of weakening demand, which has put downward pressure on prices.
On the other hand, the United States is experiencing tightening oil supplies due to decreasing production and falling inventories, pushing prices upward.
And the wildcard, the conflict between Iran and Israel, is putting what we call a $75 floor in WTI crude prices, as there is a good chance of further escalation.
Ultimately, the balance between these opposing forces will determine the direction of oil prices in the coming weeks.
Bitcoin experienced a rollercoaster week. The cryptocurrency plummeted below the critical $50,000 mark on Monday, driven by escalating geopolitical tensions and economic worries. Traders grew increasingly anxious about the global economic outlook and the Federal Reserve’s response to potential slowdowns.
However, Bitcoin staged a remarkable recovery, surging back towards the $60,000 level by the end of the week. This rebound suggests that investor interest in Bitcoin remains strong despite the challenging market conditions. Ethereum, the second-largest cryptocurrency, followed a similar pattern, experiencing a sharp decline before recovering.
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.
