Quick hits on yesterday and going forward:
They’re a mess right now. Unemployment levels are rising across the Euro Zone as Government subsidies and stimulus wane and a second wave of virus infections manifest across the region. UK Employment levels fell by the most in 11yrs as PM Boris Johnson begins to implement rolling shutdowns. The GER ZEW Business Sentiment Index fell to its lowest levels since May. More “stimmies” likely on the way from the ECB and Christine Lagarde. We remain near-term BEARISH on Europe and the EUR/USD in Q4.
Low volume, and another Gamma squeeze was reminiscent of late Aug/early September. A few things contributing to the move, 1. Option dealer’s caught offsides on short out of the money call options on big tech names were forced to chase/buy contracts in an effort to stay neutral/hedged, 2. A heavy short retail position according to the CFTC Commitment of Traders report last week, 3. Low volume days (such as yesterday) make the market tape quite susceptible to big price moves. Also, reminiscent of late Aug, was the VXN (NASDAQ Volatility Index) was +6.00% yesterday – typically volatility moves counter to the index price.
Commodities have kind of floundered since the start of Q4. Following the big “reflation” trade from June to September, the CRB Index has just chopped sideways and looks like it could roll over in Q4. Other than our long dollar in Q4 call, we haven’t shorted too many commodities, and we may not. We do see another reflation/inflation trade coming out into the first half of 2021. But, it’s Q4 2020 so we’re just going to keep 1H 2021 right there, in 2021.
Other notable moves overnight:
SPY -0.12%, NQ +0.79%, RTY -0.81%
GER -0.66%, UK -0.10%, FRA -0.37%
Shanghai +0.04%, KOSPI -0.02%
10yr UNCH at 77bps – totally unphased by this recent move in Nasdaq
Originally Posted on October 13, 2020 – Futures Market Outlook: Oct 13, 2020
Disclosure: RJO Futures
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.
Disclosure: Interactive Brokers
Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from RJO Futures and is being posted with permission from RJO Futures. The views expressed in this material are solely those of the author and/or RJO Futures and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.
There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.