Macro Update – 06/16/2025

[00:00:00.07] - Speaker 1
Sam.

[00:00:45.11] - Speaker 2
Good morning everyone and welcome to this weekly macro session. Welcome back, team.

[00:00:52.21] - Speaker 1
Good morning, Fabio. I'm doing good. Good morning, ladies and gentlemen. From whatever. Where are you listening.

[00:00:59.29] - Speaker 2
And yeah, so take it away. We have some. Sorry for the background noise, guys. Hopefully we can hear it.

[00:01:06.29] - Speaker 1
But we.

[00:01:07.26] - Speaker 2
Yeah, let's take it away.

[00:01:09.13] - Speaker 1
Yes, I have a little birdie here somewhere above my window. I don't know, I'm just trying to talk all the time that you guys don't have to bother with background noises. But maybe close the window again. Wait a minute. All right. Okay, let's get into it. Last week we didn't have a macro update unfortunately. Would have been a pretty cool one because I did some. Yeah. Deep diving into the oil market and if you have watched recent events over the weekend. Yeah, it would have been a great trade. But I decided today to do this. Yeah, like a little bit of reverse engineering. So hopefully you guys are getting a little bit more color on this market. How to look in it and. Yeah, and how to maybe set up trades as well. But as usual we will always take a look into the last week and we will always have a look on this week. What's important. So as usual we are starting with last week in spx. Don't get confused by the basic drawings here. It's just stuff out of my mind what might happen based off the options, positioning. But in general last week was.

[00:02:28.20] - Speaker 1
Yeah, pretty boring. Let's keep it like that. Monday, Tuesday, nothing really big happened into the market. It's. It's a really technical trading. Right. Obviously the 6000 strike in SPX keeps us a little bit entertained and we are trading around this all the time. It was a little bit obvious that higher highs even on daily time frames or weekly time frames, they got reversed pretty quickly. Some sort of exhaustion. I'm still in the camp. This is due to the positioning in spx. Of course you will have the same pattern then in the ES futures if you are trading. Yes, futures and the same goes for the QQQ or the NQ future. Right. This stuff works basically the same. But keep it simple. I just post the SPX chart all the time. On Wednesday the 11th last week CPI numbers highly awaited came in lower. First reaction of this was some. Yeah unwind of event hatches. We traded a little bit higher pre market got reversed. Then later into the session and then Wednesday, Thursday, Friday, the first news from the escalation. Israel, Iran had came into the news tickers and people were yeah, a little bit scared at least during the first session.

[00:03:57.25] - Speaker 1
Where Israel and Iran announced yeah. That the escalation could be might happen pretty quickly. SPX ES have dumped pretty pretty violently. This tip got bought and basically the same stuff happened on Friday. What's always a little bit of a pattern with this geopolitical risk into the closing from Friday you see people. Yeah. Taking some risk of positionings also we had some. Yeah. Volatility uptake in VIX and other products. We will go over this a little bit later in a few slides and we ended up yeah basically on lows during Friday for the week. Yeah. And the last part then is the Clovix open from Sunday afternoon. Sunday night dip got bought. We'll talk about later a little bit over this. But what is in play generally in the market? The chart on the left upper side is snapshot from some sectors from the last week. The clearly outperformer over there was the XLE which is the energy ETF for the US of course with rising oil prices also those prices tend to get higher a little bit. Weekly gain like 5.53% followed by semis tech and also TLT which is the 20 year bond ETF or what we can say.

[00:05:32.28] - Speaker 1
Stocks are still more played in bonds overall all the US sectors have yeah. Mediocre performance like the last two weeks and with the outline of the XLE because of the. Yeah. Saber rattling warmongering in the Middle East. That's the reason this little snapshot on the left lower hand side from Bloomberg has find it into the presentation. Oil fields getting attacked, blah blah blah. Gas fees getting attacked. All this stuff causes a little bit of harshness in equity markets especially when we're considering the position right now where people are still betting on the upside but technically we are a little bit limited over there because of the positioning. We spoke about this on the last pane already a little bit body market is also a little bit watching but not as closely as the whole war stuff is of course tariffs, tariff deals, China, what is going on over there? How do the talks are going? I'm still in the camp. We will continuing to front run this building up. Yeah bullish positions in U. S equities and yeah as mentioned the technically side caps as a little bit in the upside but thank God this Friday options expiring.

[00:06:59.28] - Speaker 1
Right Opex So keep it a little bit simple because we could. We don't want to dig too deep into this because I would like talk two hours over here. Market gets cleaned a little bit out in terms of positioning. Right. Think about the gamma that's out in the market and it's not likely be trading over there. Also later this month the big big JPM hex color in the SPX will find his way out of the market and will set up with a new one. But this is the last trading day of this month so in like two weeks. Still something people will watch. And for the futures trader this week is rollover. Right. If you're trading NQEs, RTY, YM or the other proxies of these markets be sure to put up the correct contract. Right. I think if we have new people in here, happens all the time. You pull up the wrong contract and you're wondering why your contract is gapping up or getting down massively. Could be maybe you're not aware of the rollover this week. So keep this in mind. Look at the most liquid and yeah the most liquid contract because this is usually the best one.

[00:08:23.23] - Speaker 1
You should trade volatility from last week. We looking a little bit into VIX fix positioning. I also brought up a little bit volatility smile for the VIX and we are basically touching out from the story from Friday over here. Right. There is a fixed shot down there and you can see this big big gap up on Friday and it's trading into the 21s 21 points. So big, big overnight gap. Yeah because of the Iran Israel thingy also positioning in the WIX seems pretty. Pretty. Yeah let's keep it reactive. That's the reason why I named the Spain. We are not on some application here in volatility. Right. It looks like people are still having some yeah sort of hedges to the upside and if those positionings are going into the money. Yeah usually things are escalating pretty pretty quickly. So if you are reading stuff over there into social media or whatever else that the market seems under hedged or people are completely yeah risk averse and have the opinion nothing bad happens. I don't share this view to be honest. I still think people are aware of yeah downside inequities whatever the reason is we don't know.

[00:09:57.29] - Speaker 1
We just can look at positionings and yeah compare stuff to each other and yeah that's the reason when the event occurs like in the Middle east you have stuff like other volatility indexes from the T decks and sdex. I brought up a chart on the left upper side, the orange line chart. The so called T decks we traded pretty high on Thursday, Friday. The T decks is. Yeah the instrument you can watch where people are buying hedging products that are usually going behind two Standard deviations I think yeah it's not just one standard deviation downside, it's over two and into three standard deviations. So big, big upside, right. That's the reason why it's called T decks. Tail decks, tail risk and equity markets. And actually it turns out if we are looking at the future open from Globex this night, we don't need those hatches. Right. Markets have been ticked up, there is no further escalation in the Middle East. Sure bombs are flying, people dying, stuff is getting destroyed but overall the market seems pretty, pretty calm with this. Right. So could be potential few for the upside. Like always when we have like yeah event risk hatching or like in this case tail risk hatching if people are not wearing those insurance they don't need it.

[00:11:35.06] - Speaker 1
Maybe they decide to go further risk on, on the equity curve. It's always potential for a little bit upside but of course you have always have to map this out with the position in the market. That's the reason why I hinted the OPEX this week. It's actually really, really important because if we are going forward this week, many, many of stuff that is actually in the money in SPX has its last trading day so yeah we should monitor this pretty, pretty accurately the week ahead. It's yeah, not that much going on in terms of data for the US market on Monday. So today retail sales in 18 minutes, import, export prices. This is nothing really special where the market is looking at from my side the FOMC meeting. The press conference on Wednesday, June 18 is more important also the next day is a holiday. Right. So Friday, partly volume day I would say maybe some people are deciding to yeah turn the machines off or let the machines turn off. I don't know, just a hint from me. But anyway what is important for June fomc as you can see with the red rectangle thing over there we got a new dot plot on Wednesday.

[00:13:16.22] - Speaker 1
Right. So this is basically a chart from the opinions of the FOMC members how fast and how many rate cuts we are getting. So for the second year, which is this year, this next year 26 it was red projection out the curve, call it like that. And the main thing over here is they have to decide a little bit is the market right with the decision just penciling in two cuts this year and 26 more cuts. Right. That's the base case which everyone is looking for. That's the reason we have this chart on the right side, the orange one. That's the so called software spread, right. Software futures getting traded for like yeah, record expectations. Keep it simple like that. And if we put out a chart the December 25th versus the December 26th contract it's trading pretty pretty low, fairly low. Right. So that's kind of the proof chart wise what the market is thinking actually less cuts in 2025 because we are doing good. Right. If you have attended previously Macro Mondays you should be aware of our view that we are communicating with the rest of the world that the April was mainly just yeah unsecure volatility in markets due to the terror stuff.

[00:14:51.02] - Speaker 1
But overall underlying we are still doing pretty decent pretty pretty strong in the U.S. right. So why cutting rates faster than we actually need in the U.S. okay, so the software spread shows you already a pretty pretty crowded trade. On the other hand, if there is a surprise on Wednesday some people yeah. Will suffer from a little bit of a rerosal in this trade. But I don't know if we have more some customers trading this market. If you do reach out. I tried a lot of softwares, I like it actually and yeah that's the positioning from the rate market how we are going into this. Right. Simplistic view, I know but we have just few minutes and there's actually a lot to picking up in this market. So I always give you a little bit of overview just. All right. The main topic of this little presentation today is the energy market. Oil is basically the second most stuff I trading all the time. And it's very interesting because the last weeks we have we have produced some research sent it out to the community that oil is actually pretty bullish. Myself I had longs in CL sub 60 it was like 59.80 something like that.

[00:16:27.26] - Speaker 1
Right. And I hold this trade to the whole. Yeah, whole of May basically was quite kind of pain trade because the WTI was mainly in mean reversion where you don't have that much trends over the day. But we escalated really really quickly. Right. And the peak of escalation was Thursday and Friday. Last week actually began already a little bit on Tuesday. And the good thing in energy markets is they can be really really boring and really really dumb for days weeks. But if you have a move like we have seen last week you can actually bank in pretty pretty quickly. Right. But also it's pretty, pretty tough to trade actually in this events. Right. So that's a four hour chart here and if you are looking at the big big green candles and how they are looking that's quite a move in CL right. From 70 to $74. That's actually big, big. Why is it like that? Because yeah, some news have hit the tape and algorithmics are going on. Volatility is expanding always and the white chart on the left side is simple spoken. Yeah. The volatility for the continuous CL contract, that's CME data.

[00:17:58.24] - Speaker 1
It's public available. You can search for it. It's called the CME Quick Strike tool. Right. You just have to make an account over there and. But it's a little bit hard to read. You have to dig in a little bit what stuff actually means. So yeah, it's not that tourist friendly, I call it like that. And if you can see the volatility is pretty, pretty high. The June volatility peaked out over 70 already which is already higher than October 2024 where we had the also escalation in the Israel Iran conflict. And what does this means already it's expensive to set on trades. Right. And if stuff is expensive, you may get to burn a little bit more. So but as you can see in the chart, the white lines basically the two news has hit in the market. Market goes parabolic and now we are trading around over there. All right, so now let's say you wanna go long. All right. Of course you can do it always with basic technical analysis. I'm never the guy that says this is wrong or yeah this is correct. If you are pretty, pretty good crack in this part of the market with technical analysis go your way.

[00:19:27.06] - Speaker 1
But I prefer to let that to always get a little bit more knowledge into this markets. Those slides are looking a little bit weird, but I think it's kind of interesting and maybe this context helps you a little bit. I also decided to build this because the takes on yeah X formerly Twitter and other social media channels over the weekend, they were hilarious. Actually people were talking about 120 for oil. Then there was also a pretty bad take about natural gas because gas field XYZ was hit and. But what the hell does this mean for NG futures in America? How they are connected, no one can tell you. And that's a big problem. Right. You can trade the stuff always, but if you pump out knowledge or label this stuff as knowledge, people usually yeah. Don't have that of a strong view. So let's change this a little bit. Okay. We are not doing a deep dive here. Just a little bit scratching on the surface. All right. Why the escalation in oil? Of course positioning plays a vital role in this. Our positioning came after this slide so we have to connect it a little bit.

[00:20:44.06] - Speaker 1
But the main take the Main take behind the actually volatility in oil just has been expanding. Last week was the outcome of the future. Does the situation get worse? What's the worst thing that could happen over there this is the map on the right side, upper right side, this is the so called Strait of Homus. It's yeah straight in the ocean. There's the Oman down there and the other land mass on the left hand side over there, the orange thingy, this is running. And yeah, the main takeaway was that Iran is yeah do a blockade on the street so it's actually closed for shipping. That would have mean 20 of the global oil supply would be cut off and that would actually be a big, big problem. Right. And I always said to the people in our community and also during the weekend over Twitter, it won't happen. Well let's say the possibility it won't happen is pretty, pretty low because you have to know the Iran is exporting 90 of oil to China. The other 10 is like Venezuela and some other yeah South American countries. And for war you need money and you get money with commodities.

[00:22:07.18] - Speaker 1
Pretty, pretty good, right? It's still the main thing. Russia exists like decades because they have as full of commodities and they sell it for good money. So why the heck should the Iran block the street? Right? Because they can't sell the oil afterwards. They did it. On top of that topic, the Oman also plays a pretty, pretty vital role down there because they own a little bit of traffic lines over there. And yeah, the Iran would basically piss off the Oman as well. The next thing was and this was priced in by oil a little bit is the next map below which are oil and gas fields of the Iran. And usually if those infrastructure stuff gets attacked and destroyed also the oil demand and supply gets a little bit out of balance in the world. And yes it's true those markets are connected into the world. Right. If the Iran cannot ship 2 million barrels per day, it's fantasy numbers of course right. To China and they maybe can just ship 1 million. China still needs the other million of barrels per day that's missing. Right. And they will buy it otherware and price of oil is going up, but prices of oil, they won't go up 100 to $120 just because some oil fields are getting bombed and also some net natural gas fields are getting bombed.

[00:23:39.25] - Speaker 1
Right. That's actually a little bit of commodity knowledge. Usually commodity traders are well aware of this stuff but yeah, tourists out there on social media was a little bit too much for me. So I decided to Put this a little bit up here. All right. This is yeah fundamentally stuff. Right. It's even more geographics and how this market works actually on the other hand you have some intermarket. Yeah. Indications is put like that at the candlestick chart. On the left side is the so called crack spread. Right. This is an industry standard where you can basically put out how profitable. Yeah. Oil companies are working. Right. It's a formula built out of what products can be refined from one barrel of oil. And as you can see, this stuff is going down. It does not mean that oil has to be go down all the time but it shows that profitability is kind of weak and kind of vanishing a little bit. This is more for the broad overview of the market overall but I still put it in there because it's fundamentally stuff. And the line chart, the orange one below is the so called prompt spread prompt within commodity futures always compares the actually front month that is trading with the next one.

[00:25:06.19] - Speaker 1
You build a spread out of this and how these spreads are widening or tightening in combination. How the future term structure is backwardation. Like we have an oil deal last month, last year maybe right over a year already backwardation or contango you can gain a little bit more of a view. And prompt threats have actually played a vital role in my trade which I told you a few minutes ago up from the 60s because these spreads were blowing out all the time again does not have to mean that the contract you are trading is ticking up immediately. It's just something you have to watch. But not on a five minute time frame, maybe, maybe daily time frame a little bit lower, like four hours. Because as you all know future term structures, they move a lock step pretty pretty basically is it? And yeah if those spreads are tightening or getting a little bit wider, it's also reflected in the price that you're actually trading. Also we have different market participants in oil. This is from our CTA model. On the left side, the other screwed oil, the wti. And on the right side is the Brent, which is the European North Sea blend for oil.

[00:26:36.21] - Speaker 1
And yeah, what was a little bit obviously into April, May, that was selling from CTAs. Right. They are trend followers. And what I always try to tell the people in our community, especially in stuff like oil, what else gold can be working as well soft commodities also pretty, pretty famous for this phenomenon. Usually they are working pretty, pretty good as a contraindication. Right. Because now you have those trend followers here which are represented by the green lines. You can see they are trading fairly, fairly down. Right. And Oil is already ticking up. So NSCTA is not like you and me where they have like 75 ticks stop in CL, they actually run big, big books and they are actually in the oil market, a very, very big market participant. And usually I use this stuff for like if fundamentally or into market wise is something changing AKA first day or Friday last week and those people are very long or slightly short where they should cover, right. Or they should chase the upside a little bit. And if you put this together with the volatility chart I have shown you for the cl, well, it's even more expensive for them, right?

[00:28:08.21] - Speaker 1
Because it also means if they are chasing those long, those squeezes in cl, they have to put on way, way more risk, right? Because the price can under a high volatility environment reversal also a little bit quicker. So when those guys are short and the oil price is ticking up for whatever reason, like we have seen last week, they usually have to chase and jump up and enforcing the long trend, right? Yeah. And this is stuff that we have seen on Thursday also Friday. Of course there's also a little bit of risk hatching for this market, right. Because no one knows what will happen over the weekend, right. Especially geopolitical risk. It's always a bet. I mean, of course the situation can escalate way, way worse, way quicker than everybody thought. And then you want to be long oil, right. Because when you are going Monday to your desk and you don't have oil position opening, but oil is open like 1012 higher overnight because the next war has broken out, probably your MD will come to you and say, hey, what the hell, why you don't make money out of this. Right? Okay. Positioning we have talking about volatility a little bit.

[00:29:35.03] - Speaker 1
CTA's positioning from the option side always adds a little bit more color to the context. This now is especially, yeah. Useful if you trading intraday also of course a little bit for the longer time frames. Usually when you have more volatility in oil markets or other commodities, people are a little bit surprised that this stuff actually can move two and a half dollars, $3, $4, whatever, you know what I mean? So it's really pretty important to look at positioning like we have here the next two future contracts for the CLM05. And as you can see, yeah, we are crowded around 70, 72, 73. And it's a little bit obvious on the right side we topped out 75 over. There is nothing that really more. And I think we opened overnight a little bit over 75. But we have we're also down pretty, pretty hardly. And basically what does this means if those options are in the money, if they are deep, deep in the money, they are not moving that much. Right. Because if you have let's say a long course 70 for CL future but CL is trading at 75. Yes, you banked in, you make really, really good money.

[00:31:04.19] - Speaker 1
But as price goes higher, your payout profile does not changing that much. Right. Because it's so deeply in the money, all this stuff. And as you can see those deeply in the money positions, if we are eyeballing this a little bit, I would say it's 68 up to 71. This is the majority of the positions that should be showing up with a baby profit. Right. So my take would be if you want to belong in oil, if you wanna speculate More upside 70, of course, right. That's a strike we have to watch. But on the other hand this has to combine with the stuff I told you a little before. Right? Of course you can set up a nice option straight out of this a little bit. But yeah, my style is more like I did on Sunday, wait for the open and shorted. Right. Because there was no further escalation over the weekend. And with this volatility expanding and also implied volatility has blown up in oil was for me more profitable to short this. I think it's still open. Not at my laptop we are trading from. So I have to see later a little bit.

[00:32:27.03] - Speaker 1
Yeah, but basically you can see it's not that easy that you can pump out a tape where I say oh, 120 NCL Monday. Let's pencil it in. Bam. Doesn't work like that guys. Okay. It's a really, really competitive field, commodity trading, especially in oil. It's the most used commodity in the world. You need it for everything, need it for everyone. So you have to dig in a little bit deeper to actually make a living from it. All right, so this is already the last thing as we are going into next week. I'm pretty sure you guys are aware that we are still having a little bit of risk on. That's the reason why I built in this little chart down there below with in green the ARC etf which I always use to yeah. Measure if we are buying big big garbage numbers into the market. Because ARC is basically unprofitable tech and all this stuff. Contrary to this stuff, people talking a lot about IRAs. That's the reason why I put, put in the US 10 hour yield and the US 20 years above there a Little bit and those yeah red boxes labeled with Trump headline risk Usually this was a time in the market where we had we had a trade deal announcement or stuff like oh you should buy stocks right.

[00:33:53.25] - Speaker 1
So great what wanna say with this Yields and stocks may rise in tandem a little bit right. From my sides not that great to be long bonds yet again even with last week's risk on geopolitical risk they haven't seen a bit right. It was so sluggish this market it looks a little bit to me to the short side eventually we will see on Monday how the market reacts to the FOMC if we are getting or anything new but main takeaway here risk yeah risk assets like stocks even it IWM sorry Arc unprofitable tech for me it looks like this was a welcome dip on Friday and we bought it again right. And this stuff over here with the tickets we have spoke about Map this against the volatility stuff from few pains earlier and yeah I'm pretty sure you will find something to trade about out of it right so yeah that's it A lot of oil I promised next micro Monday do a little bit more cross asset stuff but what's kind of important for me to talk about this over the weekend and I hope someone takes a little bit out of it.

[00:35:24.23] - Speaker 2
Thank you Tim and this was awesome as always and thank you guys. Yeah so I think we're gonna have some more session this week but it's for now we we're gonna conclude this micro Monday and thank you Tim again for your content.

[00:35:41.29] - Speaker 1
Yeah and tomorrow is Jay right with FX stuff.

[00:35:46.18] - Speaker 2
Yeah. Tomorrow we're gonna have a live trading session on forex 9:30 so stay tuned guys. It's going to be available on our YouTube and our calendar so yeah that would be really really good.

[00:35:59.00] - Speaker 1
Yeah you should definitely attempt this guys. I know him a little bit Jay. He's also German he was former Lehman Bros employee also Succen Nomura. Really really big titan Maybe not in the English speaking part of the market but in Europe is pretty pretty known right? Yeah so always interesting that would be great.

[00:36:23.26] - Speaker 2
All right thank you guys.

[00:36:26.08] - Speaker 1
Keep it like that and have a good one.