The dollar is toying with 100.00
Today is officially the first day of summer; it is also the beginning of what is generally a quiet time for the markets.
There isn't much to look forward to from here
Today is officially the first day of summer; it is also the beginning of what is generally a quiet time for the markets. In fact, the upcoming July 4th holiday is often referred to by industry insiders as "Christmas in July" because of collapsed volume and, more often than not, light volatility. If the bears are going to convert in the S&P 500, they will need to do so sooner rather than later. The lighter trade gets, the more likely prices are to increase.
We also have our eye on the US dollar. The greenback has been dribbling lower after an attempt at a rally earlier in the month. The lower the dollar goes, the more support risk assets and commodities will receive from the currency trade. Accordingly, although we believe the stock indices are due for a good correction, the window of opportunity is closing.
Treasury Futures Markets
30-year Treasury Bond Futures
Treasuries have died; this is good news for the masses
As it turns out, June 2023 is where Treasury market volatility went to die. This is positive news for everyone except those who are overleveraged on bearish stock plays. Although the Fed would like to blame this year's wave of bank failures on mismanagement, it was just as much the result of extreme and sudden Central Bank policies. Dramatic shifts in monetary policy triggered unusual Treasury market volatility and created massive paper losses on the held-to-maturity (previously perceived to be risk-free, or at least low-risk) assets on the balance sheets of banks.
The calm after the storm should give flailing banks the time they need to stabilize their financials. This, of course, is a positive for the entire system. It should also keep the demand for Treasury securities healthy. We still like being bulls from 125'0ish in the 30-year bond.
Treasury futures market consensus:
The chart is neutral, and so are we (for now) but we would be willing to get bullish again on a dip to 125 in the ZB.
Technical Support: 125'01, 12'26, and 120'10 ZN: 111'26, 110'02 and 108'27
Technical Resistance: ZB: 130'09, 133'04, 135'05 and 140'0 ZN: 114'13, 115'21, 117'10 and 119'15
Stock Index Futures
The COT might show that roughly 40% of the shorts have been squeezed out.
We won't know until Friday, when the COT Report is released by the CFTC, but we have a feeling that almost half of the historic net short position being held in the E-mini S&P 500 futures market was unwound on last week's highs. As a reminder, the report data is collected at the close of Tuesday's trade and released on Friday. So even the figures reported each Friday lag a few days. Nevertheless, we will soon know what the market composition is. If we are right, a good portion of the short squeeze risk has been alleviated and that might allow a healthy correction to ensue.
The ES bears will want to see a close below 4400; this is what it will take for prices to fall back within the previous trading range (negate the recent breakout). A close above this level on Friday, would be highly bullish. Let's see what happens.
Stock index futures market consensus:
If 4400 gives way on the September contract, the ball will start rolling down the hill pretty quickly. 4200 would be a natural corrective target.
Technical Support: 4400, 4220, 4063, 3900, and 3790
Technical Resistance: 4475 and 4505
E-mini S&P Futures Swing/Day Trading Levels
These are counter-trend entry ideas. The more distant the level, the more reliable, but the less likely it is to get filled
ES Day Trade Sell Levels: 4475 and 4505
ES Day Trade Buy Levels: 4400, 4340, 4220,
In other commodity futures and options markets...
March 10 - Buy July corn $6.50 call near 13.5 cents.
March 20 - collar strategy in December cotton. Go long the December future near 79.00, buy the December 70.00 put and sell the 90.00 call for a small credit (limited risk and limited reward).
March 22 - Risk reversal in Christmas hogs - Buy the December 90.00 call and sell the 66.00 put for a net credit of 70 to 100 points.
April 3 - Buy July natural gas $2.75 call, sell the $3.50 call and sell the $2.25 put near even money.
April 5 - Buy July Sugar 22.00 put near 79.
April 11 - Scale into September oats.
April 25 - Buy July corn $6.25 calls
April 28 - Buy December corn $6.00 calls
May 18 - Buy November soybean $12.20 call, sell the $13.20 call and the $11.00 put.
May 18 - Buy December corn $5.70 call and sell the December $4.50 call.
May 22 - Buy December wheat $6.50 call, sell the $7.50 call, and sell the $5.70 put.
May 23 - Buy the September bond 127 call, sell the 132 call, and sell the 122 put for a net cost of about 15 ticks.
June 5 - Sell the August 180 call and use the proceeds to buy the August 166 put.
June 12 - Buy October crude oil $72.00 call, sell the $77.00 call and the $57.00 put.
June 13 - Sell September 4600 call and buy the 4000 put for close to even money.
June 15 - Buy October sugar 24 puts near 65 points.
June 15 - Buy the September soybean 12.60 put, sell the 12.00 put and sell a 14.00 call for even money.
June 20 - Buy the September corn $5.50 put and sell the $6.50 call.
Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.
Seasonality is already factored into current prices, any references to such does not indicate future market action.
**There is substantial risk of loss in trading futures and options.** These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.