SP500 LDN TRADING UPDATE 23/06/25
***QUOTING SEP CONTRACT FOR JUNE CONTRACT OR CASH US500 EQUIVALENT LEVELS SUBTRACT ~50 POINTS***
***WEEKLY ACTION AREA VIDEO TO FOLLOW AHEAD OF NY OPEN***
WEEKLY BULL BEAR ZONE 6050/60
WEEKLY RANGE RES 6130 SUP 5900
DAILY RANGE RES 6085 SUP 5965
DAILY VWAP BEARISH 6047
WEEKLY VWAP BULLISH 5980
DAILY ONE TIME FRAMING DOWN - 6071
WEEKLY ONE TIME FRAMING UP - 6003
MONTHLY ONE TIME FRAMING UP
GAP LEVELS 5843/5741/5710/5339
Balance: This refers to a market condition where prices move within a defined range, reflecting uncertainty as participants await further market-generated information. Our approach to balance includes favouring fade trades at the range extremes (highs/lows) while preparing for potential breakout scenarios if the balance shifts.
One-Time Framing Up (OTFU): This represents a market trend where each successive bar forms a higher low, signaling a strong and consistent upward movement.
One-Time Framing Down (OTFD): This describes a market trend where each successive bar forms a lower high, indicating a pronounced and steady downward movement.
GOLDMAN SACHS TRADING DESK VIEWS
Connecting You to GS: Insights from the Floor
FICC and Equities | 21 June 2025 | 3:48 PM UTC
Key Themes Resonating with Global Clients and GS Perspectives
If you have comments, opinions, or ideas to discuss, feel free to reach out to the team members mentioned below.
1) Connecting You to GS
Oil Risk Premium and Market Reactions:
Current Situation: Oil prices currently reflect a geopolitical risk premium of approximately $10 per barrel.
Potential Escalation: In a scenario of heightened tensions, prices could surge by an additional $25 or more.
Market Impacts: How would markets react to $100 oil? What implications would this have for portfolios, especially with recent FX/USD volatility?
US Data and Tariffs:
With CPI, PPI, and Import Price data now available, how are tariffs affecting costs? Is the pass-through to consumers slower or smaller this time?
KRW Trade:
As KRW returns to pre-election levels, do we still favor the trade?
2) Trades We Like
Geopolitical Risk-Premium Trades/Themes:
Oil:
Risk Premium: We estimate $10-15/bbl of risk premium in the market, with potential for an additional $25+ in case of escalation.
Desk Activity:
Oil producers have been active, as evidenced by quick retracements after rallies.
Macro funds are hedging portfolios via calls and call spreads.
Hedge funds are beginning to fade the move, given the built-in risk premium, implied volatility, and skew.
Trade Ideas:
Upside for Escalation: Use call spreads to capitalize on elevated call skew. Example: Buy Oct Brent 90/100 Call Spread for $0.95/bbl (over 10x max payoff).
Downside for De-Escalation: Favor put spreads, especially in a 1x2 ratio format, as volatility may collapse if prices drop. Example: Oct Brent 60/55 1x2 Put Spread for $0.25/bbl (20x max payoff).
(h/t Tom Evans)
FX:
Hedge against a significant oil-driven risk-asset drawdown using AUDJPY.
Scenario Analysis: Public statements suggest a decision on direct US military involvement in Middle East tensions could be made within two weeks.
In extreme escalation scenarios, oil could spike to $120-150 per barrel.
Equities may drop 200-300 points if oil gaps to $100.
Trade Idea: AUDJPY is highly correlated with SPX. Example: 1-month Dual Binary AUDUSD < 1.75% OTM vs USDJPY < 2% OTM for 4.95% (max ~20x leverage).
(h/t Daan Struyven, Jerome Dortmans, Shawn Tuteja)
EMEA Rates:
Flattening Opportunity: Central banks are unlikely to react to temporary shocks, but prolonged higher oil prices could trigger a selloff in front-end yields.
Risk-off sentiment and crowded steepener positioning create a tactical opportunity for flatteners.
Trade Idea: Buy EUR 1bn 6m 2s10s SL CMS ATMF Floor @ 12c vs. Sell EUR 1bn 6m 2s10s SL CMS ATMF-20bp Floor @ 6c (3.3x payout ratio if 2s10s EUR flattens to 40bp in 6 months).
(h/t Aaron Tam)
Max Loss on Trades:
Limited to the premium spent for Brent Call Spreads, AUDUSD/USDJPY Dual Binary, and Rates Floor Spread.
Unlimited for Brent 1x3 Put Spreads.
3) GS Commentary
Oil:
Daan Struyven (Co-Head of Commodity Research):
"Oil prices currently incorporate a geopolitical risk premium of approximately $10/bbl. The term structure of implied volatility, the oil futures curve, and call skew suggest the market views significantly higher prices as a real possibility in the coming months. However, the long-term outlook remains unchanged.
"We also estimate that TTF natural gas prices reflect a 10-15% probability of a major supply disruption, such as through the Strait of Hormuz."
Our base case assumes that the risk premium in oil and European natural gas prices will decline if energy flows remain undisrupted. However, we are closely monitoring two potential disruption scenarios:
1. Iran-Only Oil Disruption Scenario: In this case, Brent crude oil prices could peak slightly above $90 per barrel. The persistence of elevated prices would depend on whether Iran's supply recovers and whether core OPEC+ producers increase production to offset the disruption.
2. Broader Regional Disruptions: This scenario involves significant disruptions to regional oil production or shipping, including potential impacts on the Strait of Hormuz. Nearly one-fifth of global oil production and LNG supply passes through the strait, making energy supply and demand highly price-inelastic. Oil prices could exceed $100 per barrel and may temporarily double in the event of a prolonged disruption. Similarly, TTF natural gas prices could rise to EUR 75/MWh, nearly doubling current levels, with sustained disruptions potentially pushing prices even higher. However, a prolonged closure of the Strait of Hormuz seems unlikely, as the resulting global recession risks would likely prompt U.S. intervention to reopen the strait.
Market Dynamics and Escalation Phases
Jerome Dortmans (Co-Head of Global Oil + Products Trading) summarized key market developments during the GS Weekend Macro call:
- Pre-Escalation Phase: Before tensions rose, the market was positioned for loosening balances due to OPEC's quota policy of increasing production and ongoing uncertainty surrounding global economic growth amid tariff negotiations. Oil prices hovered in the $62–66 range, with no risk premium factored in for potential escalation involving Israel and Iran.
- Warning Signs: Initial signals included U.S. withdrawals and evacuations, alongside Israeli threats of attacks. The market initially discounted the likelihood of significant developments. However, once Israeli engagement occurred, spot prices spiked by $5 per barrel, accompanied by increased volatility and call skew. Following Iran's response, further short covering drove prices to $74–76, peaking at $78—a $9 increase from pre-escalation levels. Diplomatic talks briefly calmed the market, bringing prices back to $71, with a $5–7 risk premium remaining. Midweek, escalating U.S. rhetoric and geopolitical events pushed the premium to $10–12.
Scenario Analysis for Oil Prices
1. Current Scenario: Without significant supply disruptions, oil prices may maintain a $5–7 premium, trading slightly above $72 per barrel. Fear of potential disruptions is already impacting market sentiment without materially affecting physical supply.
2. Targeted Iranian Oil Asset Attacks: If Israel targets Iranian oil-related assets (e.g., refineries or export terminals), a meaningful Iranian response affecting the Gulf and the Strait of Hormuz is likely. Prices could rise to the $80–90 per barrel range.
3. Regional Supply Disruptions: Should Iran retaliate by targeting U.S. military or neighboring Gulf oil assets, material supply losses and shipping disruptions through the Strait of Hormuz are expected. Prices could reach $100 per barrel as independent shipping activity ceases, with only sovereign-owned vessels operating.
4. Strait of Hormuz Closure: If Iran shuts the Strait through mines or attacks, up to 17 million barrels of crude and 4–5 million barrels of products per day could be impacted. The market would struggle to cope, driving oil prices to $120–150 per barrel, similar to price behavior during Russia's invasion of Ukraine.
Market Reactions to $100 Oil
- FX/EMFX (Alan Stewart, Head of EMEA EM Trading): A crude price above $100 per barrel would likely strengthen the USD, weakening EM currencies such as PLN, HUF, CZK, ZAR, and KRW. While Europe’s LNG exposure may limit EUR weakness, the broader move to risk-off sentiment could drive demand for hedges in USD/CE3, USDZAR, and USDKRW.
- Equities (Shawn Tuteja, Head of US Equity Index Trading): A rapid rise in oil prices to $100 would likely trigger a risk-off event for equities, particularly in AI-related sectors where positioning is concentrated. Broader equities could drop 200–300 points, with a downside floor near 5700.
- USD Rates (Brian Bingham, Short Macro Trading): While a short-term oil price spike would complicate the FOMC’s outlook, it may not derail anticipated rate cuts in the second half of the year. The committee's willingness to look through temporary price shocks and its focus on labor market weakness suggest a limited impact on policy trajectory.
- FX Volatility (Simon Costello, FX Options Trading): Geopolitical escalation has strengthened the USD across the board, with safe-haven currencies like JPY and CHF
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!