May 2020 Futures & Cash Settlements
Chaos Continues
We hope and pray that our leaders can find a way to resolve this ongoing chaos and destruction. It seems many have taken it upon themselves to turn peaceful protests into a reason to recreate the movie “The Purge” where lawlessness reigns supreme and any sense of civility is lost.
We thought mankind was better than this, we thought that our world was making progress and then all of a sudden, boom, it’s like we are back to square one. We understand the anger, the frustration but we will never condone such wild and dreadful demeanor from anyone no matter what the circumstances may be.
We will not share the devastation here, we will not show the world here what has transpired in our own backyard. In fact we received word from local authorities that the very town we live in is on the “Antifa” hit list to allegedly “take back what is ours.” That is interesting, I never knew you could lay claim to something you didn’t actually have anything to do with, however since logic is apparently been tossed firmly out the window, we can only say this,
“THAT THE FIGHT TO REMOVE THE 2ND AMENDMENT WILL NEVER, EVER COME TO FRUITION NOW THAT AMERICA HAS ONCE AGAIN WITNESSED THE VERY FACT THAT WHEN THE TENSIONS FLARE, YOU REALLY CAN ONLY RELY UPON YOUR OWN SELF AND YOUR OWN CAPABILITIES TO PROTECT AT ALL COSTS WHAT IS RIGHTFULLY AND PURPOSEFULLY YOURS AND WHAT YOU HOLD CLOSE TO HEART.”
The outright disgusting behavior witnessed in our own back yard this weekend, deserves to be etched deeply into our psyche as a constant reminder that civility can be lost for moments in time, and within that short moment, many can do things that were once thought unimaginable, unthinkable and it is in that reality that we must always be firmly cognitive of.
OK, onto the May 2020 Settlements the big winner of the month was WTI Crude, the July future posted a massive 76.39% gain and to think that it was trading at negative prices, something which we wholeheartedly believe that the CME and other exchanges, should not allow it to do. Why? Because this opens the door for wild manipulation by those with enough balance sheet to game the markets.
In this algorithmic world of high frequency gaming, we can ill afford to have a bottomless pit just because the integrity of the market is lost. If the exchanges set a floor at zero than that is it, the futures will settle no lower despite the bids disappearing. We would love an argument against this, in fact we welcome it!
RBOB was the second big winner up 37% and Silver, which is finally positive on the year and has been making some decent head way vs Gold lately was up 24.42% this month.
The US Treasury short end of the yield curve was also a big winner this month as the curve continues to steepen, meaning the long end is losing ground while the short end stays anchored by the FEDs and global central banks ZIRP.
We were shocked to see the Nikkei up some 9.58% then again all that BOJ buying on top of the rest of the global printing presses on overdrive we suppose this should have been expected. Even the DAX index was up nearly 7% on the month. The laggard and constantly hit Russell 2k was up some 6.59% beating the Nasdaq by a few basis points, which is the first time its done that in, well quite some time.
As far as the losers on the month, the VIX continues to lose out, its still up big on the year, but this rally back has taken its toll as it lost some 16.63%. Nat Gas was the second big loser, dropping 15.26% and as we spoke about the long end of the US Treasury losing ground as the 30 YR on the run yields rose 13 basis points on the month which translated into a 10.21% decline in terms of yields rise.
Anyway, here is the scorecard, we hope you enjoy reviewing the data all the Fixed Income is now September futures, Eurodollars we use the Z21 contract:
In regard to the US Treasury steepening, we present this chart of the inter-commodity spreads. The BOB which is the Bond Future vs the Ultra Bond Future is nearing spread maximums posted during the liquidity meltdown and it seems to be dragging both the NOB and the FOB along with it.
We also thought that the DAX chart was interesting rising up nearly 62% off its lows and holding just below that level:
We can’t help but think that ECB funny money is going to play a bigger part here in a continued rebound, yet we aren’t quite sure the bigger geopolitical posturing between the US and China right now might start taking precedent.
As we have said for the last few years, the narrative has been Russia, Russia, Russia, but we know better, the reality is, its China that is at the forefront here as our true main adversary.
We can’t help but think the main stream media has purposefully distracted the common focus onto Russia for this reason and if it does end up being true that these narratives are indeed nefariously orchestrated then God help us all, for the Fourth Turning that Strauss and Howe talked about in their book, may very well be transpiring right before our eyes.
In closing, we would like to wish you all peace, health and prosperity during this time, if you feel like you need clarification on anything we post, on anything market related, politically, geopolitical, technical, fundamental, please ask, or if you have information that you think warrants discussion, please share. Also please forward our writing to anyone you think would benefit from our analysis. This information contained in this post is the kind of content our “subscribers only” will have access to which also includes our daily settlements and market commentary with intra-day updates on information we feel is “need to know.”
We hope we have shared enough to pique your interest. If there are topics on trading, investing or risk type of questions you have, shoot them over, comment or reach out directly. We thank you for riding along on this journey with us.
-Magnelibra Econemotions
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