Weekly Report: Key Views
Hello everyone, and welcome to another edition of our Macro Strategy Weekly. Each issue features market strategy insights from selected contributors with relevant professional expertise. We also track how their views perform each week. Here is a preview of this week’s key ideas:
1. Near Term Direction for US Equities Remains Unclear, Pending CPI and TSMC Earnings
The baseline scenario for US equities this week remains consolidation near current highs. A downside break is the next most likely outcome, followed by a move to new highs and a higher trading range. All three scenarios remain possible. Easing diplomatic tensions ahead of the election should support market stability and may delay a larger correction, although a modest near term pullback remains a risk. The key events are the US CPI release on October 14 and TSMC earnings on October 15. The probability of an October rate hike is currently below 20%. If CPI materially exceeds expectations, interest rate forecasts and technology valuations could face renewed pressure. Investors should therefore wait for these events before positioning.
2. Technology Flows Turn Cautious as Low Trading Volume Raises Volatility Risk Near Market Highs
Early reports that OpenAI revenue may miss expectations triggered a selloff in technology stocks. Information technology shifted from the most heavily bought sector in four of the previous five weeks to the most heavily sold last week. A correction in Korean equities also prompted CTAs to cut their global equity exposure by more than half. However, reductions in US equity positions were relatively limited. Exposure remained at about $39.87 billion, above the historical average of $32.36 billion. SPY’s five day average trading volume fell near a multiyear low, indicating caution over directional bets. Thin trading could also amplify short term volatility.
3. Nvidia’s Near Term Structure Weakens; Distinguish a Top Fractal Breakdown from an Ascending Channel Breach
Nvidia has broken below its short term top fractal, although a breach of the broader ascending channel remains unconfirmed. A further pullback and a rebound within the channel are both possible. A small exploratory position may be considered near the channel’s lower boundary. However, a bullish signal requires a valid bottom fractal and a confirmed upside breakout. A brief move below the trendline should not be treated as the end of the trend. If the ascending channel breaks decisively, investors could adjust their strategy and consider an at the money straddle to benefit from rising implied volatility.
4. Long Duration Bonds Favor a Near to Medium Term Rebound, but a Sustained Oil Rally Could Weaken the Bottoming Case
CTA net short positions in US Treasuries are at historically extreme levels, so short covering could amplify a rebound. Expectations of slower rate hikes ahead of the election and continued bond inflows also support a near term bottom. During the week, cash, US Treasuries and investment grade bonds received inflows of $166.4 billion, $16.2 billion and $10.3 billion, respectively. Rising rate hike expectations alone may be insufficient to push long duration bonds below their previous lows. Their impact on inflation expectations remains the key factor. The main risk comes from energy supply. Global crude inventories have fallen by nearly 600 million barrels over seven months, with almost 60% of the decline coming from non OECD countries. A sustained surge in oil prices could put long duration bonds under renewed pressure.
5. Gold Eyes Support Near $4,100; Manage Rebound Potential and Options Risk Separately
If CPI does not materially exceed expectations and the pace of rate hikes slows, gold could form an interim bottom near $4,100. The rebound is likely to be weaker than in August, with resistance between $4,400 and $4,500. Investors should focus on short term trades or small strategic allocations, adding exposure after the trend is confirmed. They could also sell puts on a rolling basis or hedge long futures with protective puts struck below the trading range. Once gold futures break above their 20 day moving average, investors could sell puts below $4,000 and buy a protective leg at a lower strike such as $3,950.
6. Oil Correction May Continue; Await Support Tests and Geopolitical Signals Before Entry
Oil prices fell despite news of an attack, indicating that geopolitical developments have yet to generate fresh upside momentum. The correction since mid September may continue, while the trendline from July remains at risk. The area around $80 offers stronger support. If the conflict escalates again in the fourth quarter, the preferred strategy is to go long crude oil and short risk assets. If tensions remain contained, the gradual US equity rally and range bound trading across most assets may continue. Brent still trades at a premium of more than $10 to WTI. Investors should watch whether the spread narrows before widening again. If WTI breaks support first, Brent may follow with a delayed decline.
7. Oil Exposure Through Calendar Spreads and Iron Condors; Adjust Positions After a Range Break
Passage through the strait remains unresolved, while deferred WTI contracts trade at about a 12% discount to spot prices. Investors could consider buying nearer dated contracts and selling deferred contracts. Examples include buying December and selling the following March, or buying June and selling September. The spread between contracts three months apart is currently about $3 per barrel, compared with $10 in September. Recent spread lows can serve as risk limits. USO is trading within a range of $140 to $160, making an iron condor options strategy suitable. Positions should be closed if USO falls below $140 or rises above $160.
This Week’s Report
Hawkish Minutes, but Near Term Rate Hike Expectations Ease as Rising Inflation Limits Policy Flexibility
The S&P 500 rose 1.20% this week, yet only four of its 11 sectors advanced, highlighting a divergence between index performance and market breadth. Energy (XLE) led the market with a 2.50% gain. Consumer Staples (XLP), Health Care (XLV) and Communication Services (XLC) rose 1.80%, 1.00% and 0.80%, respectively. Among the decliners, Utilities (XLU) fell 2.20%, Financials (XLF) dropped 1.80%, while Industrials (XLI) and Technology (XLK) each lost 1.50%.
Overall, energy and some defensive sectors outperformed. However, the decline in utilities shows that defensive exposure lacked broad support, leaving the market dominated by sector level divergence. Technology weakened despite the index gain, indicating that the previously concentrated AI trade faces correction pressure. Financials remained under pressure, with US banks losing about $270 billion in market value over the past month. A flatter yield curve also constrained net interest margin expectations. The index rally has yet to produce broader sector improvement, so its durability will depend on whether market participation recovers.
Valuation: Overall P/E Falls Below Its Historical Average, While Sector Valuation Gaps Remain Wide
The Information Technology sector (XLK) saw its P/E fall from 34.59x last week to 32.20x, though it remains the highest among all sectors. Its valuation is reasonable against its five and ten year history, although it remains expensive on a 20 year basis. Healthcare (XLV) trades at 30.48x earnings and is considered expensive or overvalued across all three periods. Therefore, its recent relative strength lacks clear valuation support.
According to MacroMicro, the S&P 500’s P/E ratio fell further to 24.35x from 24.82x last week, below its 10-year average of 25.2x.
Rate Constraint: Equity Bond Yield Spread Falls Further as High Rates Weigh on Equities’ Relative Appeal
According to MacroMicro, the equity earnings yield stands at 3.75% this week, versus 5.231% for the 10 year US Treasury. The spread remains negative because equities offer a lower current yield than Treasuries. Therefore, high interest rates continue to constrain equities’ relative valuation appeal. The earnings yield fell from 3.79% to 3.75%, while the 10 year Treasury yield stayed above 5.2%, pushing the spread lower. Although the overall P/E has fallen below its historical average, this alone does not indicate that equities have become more attractive than bonds. The outlook still depends on corporate earnings growth and a decline in long term rates.
Community Views This Week
@Ivan_Gan：Gold Near 4,100: Is This Another Dip-Buying Opportunity? Watch Oil Calendar Spreads💰📉
A slower pace of Fed rate hikes would support precious metals. Therefore, unless this week’s CPI materially exceeds market expectations, downside risk to gold and silver should remain limited. This makes current levels comparable to the gold buying opportunity in July. Gold may be nearing a tactical bottom, although the tightening cycle should limit the rebound compared with August. Resistance is likely around 4,400 to 4,500. Investors should favor short term trades or build small long term positions, then add gradually after the trend is confirmed. Another strategy is to roll short puts for premium income, with the strike set at the desired entry price. Alternatively, investors can buy puts below the trading range and pair them with long futures. This structure offers lower potential returns while limiting losses from additional market volatility.
$Gold - main 2612(GCmain)$ $E-Micro Gold - main 2612(MGCmain)$ $1-Ounce Gold - main 2612(1OZmain)$ $SPDR Gold ETF(GLD)$
Crude Oil: Favor Long Calendar Spreads Over Directional Trades
The current crude oil market is better suited to calendar spread trades between nearby and deferred futures. A typical strategy pairs contracts three months apart, such as long December and short March, or long June and short September. Experienced investors can also use four or six month intervals. Three month spreads currently trade near $3 per barrel, which is not especially attractive. However, the risk is more manageable than an outright directional position. Recent lows remained above zero, implying downside of about $3 per barrel. If crude rallies sharply, the spread could widen further. In September, it reached $10 per barrel. Therefore, calendar spreads offer easier risk control while retaining attractive return potential.
Strategy Takeaways
This week’s US CPI is the key event. If it does not exceed expectations, the October FOMC meeting should be largely uneventful, shifting attention to the midterm elections.
1. Last week’s short put strategy on equity indices generated limited intraday activity and a steady return of 0.7%. As options volatility has declined, position sizes will remain small this week.
2. COMEX gold briefly fell below 4,100 last week before rebounding, while 4,000 remains strong support. Therefore, this week’s short put strategy will focus on gold by selling weekly puts with strikes below 3,950. Small positions in gold related assets may also be accumulated. Over the medium to long term, gold is expected to trade between 4,000 and 4,800.
3. For crude oil futures, consider a calendar spread between contracts three months apart. Buy the December contract and sell the following March contract. The spread is currently near $3 per barrel and could rise above $5 if tensions in the Strait of Hormuz escalate again. Set the hard stop at zero and adjust the soft stop based on developments in talks between the United States and Iran.
@程俊Dream ：Oil May Retest $80: Watch the Brent-WTI Spread Before Buying the Dip📉💰
WTI crude completed a sizable rebound before several daily nine count signals appeared, leading to a correction around mid September. Bears are now testing the trendline support in place since July, with a material risk of a breakdown. Without fresh geopolitical catalysts, the correction could take the form of either a gradual decline or a sharp selloff. Strong support is concentrated near $80, so a retest of this area could provide a firmer base for the next advance.
The Brent WTI spread deserves close attention. At the low of this correction, the spread narrowed to about $3, while it stayed above $10 for much of the crisis peak. It remained above $10 early this week, indicating that Brent’s premium remains justified. A genuine new oil bull market may require the spread to narrow first and then widen again.
$United States Oil Fund LP(USO)$ $Marathon Petroleum(MPC)$ $WTI Crude Oil - main 2612(CLmain)$ $E-mini Crude Oil - main 2611(QMmain)$ $Brent Last Day Financial - main 2612(BZmain)$
Strategy Takeaways
Trading: EUR/USD recently fell to a fresh low. Therefore, this week, we adjusted the pending orders by placing limit sells at 1.1360 and 1.1440, with a stop at 1.1580 and a target at 1.09.$Euro FX - main 2612(EURmain)$ $EUR Index(EURindex.FOREX)$
For crude oil, last week’s protective stop at 88 was triggered. As a result, the long positions entered at an average of 75 were closed in full at an average of 91.5. This week, we are keeping limit buy orders at 83 and 75, with a stop below 67 and a target at 115.$United States Oil Fund LP(USO)$ $Marathon Petroleum(MPC)$ $WTI Crude Oil - main 2612(CLmain)$ $E-mini Crude Oil - main 2611(QMmain)$
Meanwhile, the additional Ether short order placed last week was filled at 2,645. This week, we will move the stop to breakeven near 2,644 and slightly revise the targets to 2,380 and 1,850.$iShares Ethereum Trust ETF(ETHA)$ $Micro CME Ether - main 2610(METHmain)$ $CME Ether - main 2610(ETHmain)$
P.S. Once the first target is reached, the stop will automatically move to breakeven. Any post entry adjustments will be shared in future articles.
@Owen_trading room：Two Risk Events Ahead: Will Nvidia Lose Support? Options Strategies for Range-Bound Gold and Oil💰
The US equity market has reached a near term high. The key challenge is interpreting what current volatility signals. A pullback could be a brief pause within consolidation or the start of a decline. An upside test could reverse quickly or lift the entire trading range. US equities now stand at this crossroads.
$SPDR S&P 500 ETF Trust(SPY)$ $S&P 500(.SPX)$ $Cboe Volatility Index(VIX)$ $E-mini S&P 500 - main 2612(ESmain)$ $Invesco QQQ(QQQ)$ $NASDAQ(.IXIC)$ $ProShares UltraPro QQQ(TQQQ)$ $E-mini Nasdaq 100 - main 2612(NQmain)$ $Dow Jones(.DJI)$ $E-mini Dow Jones - main 2612(YMmain)$ $SPDR Dow Jones Industrial Average ETF Trust(DIA)$
Ranked by probability, the most likely path is continued consolidation near current highs. A downside break and sustained decline rank second, while a fresh high followed by a higher trading range is least likely. Although the probabilities differ, all three remain possible. Committing too early to one scenario could turn uncertainty into positioning risk.
$Hang Seng Index - main 2610(HSImain)$ $Hang Seng Tech Index - main 2610(HTImain)$ $China A50 Index - main 2610(CNmain)$
Therefore, a more prudent approach this week is to wait for clearer signals from upcoming events and technical indicators. Key catalysts include US CPI and TSMC earnings. Technically, whether Nvidia can hold its rising channel will be an important signal. Meanwhile, price swings in gold and crude oil are creating opportunities for options strategies.
$Micron Technology(MU)$ $NVIDIA(NVDA)$ $Tradr 1.5X Short NVDA Daily ETF(NVDS)$ $Taiwan Semiconductor Manufacturing(TSM)$
Strategy Takeaways
If the share price falls to the red circled area, investors may consider a small position. However, short term downward momentum could temporarily push the price below the trendline. A stronger confirmation would be a valid bottom fractal followed by a breakout above that structure. This could trigger a rebound.
If Nvidia decisively breaks below its rising trendline, the strategy should change. Investors could build an at the money straddle to position for higher implied volatility, or IV. The trade would then target volatility expansion, replacing the channel based rebound strategy.
Turning to crude oil.
Overall, crude oil offers range trading opportunities, while positions must also account for upside breakout risk.
One approach is to build an iron condor on USO, targeting a trading range between 140 and 160. These boundaries apply to USO and should be distinguished from WTI futures prices.
The position shown uses options expiring on October 21. It buys the 138 put, sells the 140 put, sells the 160 call, and buys the 162 call. The protective legs on both sides complete the iron condor. The simulation shows a maximum profit of $70.50 and a maximum loss of $129.50, creating a defined risk structure with capped returns.
The strategy depends on USO remaining within the target range. However, the position should be closed before the maximum loss is reached. Exit if USO breaks below 140 or above 160. A range trade should not become passive exposure to a trend breakout.
To hedge against a sharp oil rally, investors can prepare a calendar spread in futures. Once WTI breaks above 93.5, buy the nearby December contract and sell the following March contract. This bullish spread provides protection during an upside breakout. The broader calendar spread strategy remains valid, although this position has its own trigger and stop. Exit if WTI falls back below 93.5.
$E-mini Crude Oil - main 2611(QMmain)$ $Micro WTI Crude Oil - main 2611(MCLmain)$
Turning to the Gold Strategy
The gold strategy also requires confirmation. Wait for the continuous gold futures contract to break above its 20 day moving average before selling weekly puts with strikes below 4,000 to collect premium. To protect against a sudden decline, buy a lower strike put, such as 3,950, to cap the downside risk.
$Gold - main 2612(GCmain)$ $Silver - main 2612(SImain)$ $E-Micro Gold - main 2612(MGCmain)$ $Micro Silver Futures - main 2612(SILmain)$ $100-Ounce Silver - main 2612(SICmain)$ $1-Ounce Gold - main 2612(1OZmain)$
This strategy can also be implemented through GLD. The example sells the October 20 put with a 375 strike and buys the 370 put with the same expiry. The simulation shows a maximum profit of $69.50 and a maximum loss of $430.50. The lower strike long put caps the risk of a sudden decline. The 4,000 and 3,950 levels apply to gold futures, while 375 and 370 apply to GLD. These levels are not interchangeable.
If GLD breaks below its previous low of 373, exit immediately. Do not wait until the maximum loss shown in the chart is reached.
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