JPMorgan’s Math Shows Why U.S. Stocks Can Keep Rallying; This stock-market rally refuses to conform to norms

Jun 2, 2020

Observations & Insight

OCC Monthly Volume by Exchange – May 2020

Lead Stories

JPMorgan’s Math Shows Why U.S. Stocks Can Keep Rallying
Justina Lee – Bloomberg
Think the sizzling U.S. stock rally is excessive in an economy frozen by shutdowns? From one perspective, it’s just getting started.
Giant piles of cash sloshing around the financial system means there’s substantial ammunition yet to push risk assets higher. JPMorgan Chase & Co., meanwhile, sees potential for billions to flow into equities at the expense of bonds to rebalance portfolios. Money-market funds have lured $1.2 trillion this year, while fund managers with $591 billion overall are holding cash at levels rarely seen in history, according to Bank of America Corp.

This stock-market rally refuses to conform to norms
Lawrence G. McMillan – MarketWatch
Whatever you want to call the stock-market rally that began in late March is irrelevant, because it isn’t conforming to norms. It just keeps rolling higher, ignoring bad news, social turmoil and, now, overbought conditions.
None of it matters, and it won’t unless support is broken on the S&P 500 SPX chart.

US companies sold stock at the fastest rate ever in May as markets rallied
Carmen Reinicke – Markets Insider
Publicly traded companies in the US sold shares in the fastest clip ever in May, as the market rebounded from the coronavirus-induced meltdown.
US public companies sold $65.3 billion of new shares in May, the highest on record, Reuters reported, citing Refinitiv data. That’s a jump from April, when issuance was $22.3 billion, and March, when it dipped to $4.8 billion, the lowest month since December 2018.

Hedge funds turn bullish on crude, remain cautious on fuels
John Kemp – Reuters
Hedge funds continue to bet on a recovery in oil prices, but their bullishness is concentrated on crude, especially U.S. crude, while refined fuel markets are expected to take longer to tighten.
Hedge funds and other money managers purchased the equivalent of 26 million barrels of futures and options in the six most important contracts in the week ending on May 26.

Stocks will plunge 15-20% from current levels as US protests add to the market’s ‘menu of uncertainties,’ BTIG says
Saloni Sardana – Markets Insider
Wall Street brokerage BTIG is warning investors to brace for a slump of 15 to 20% in stocks going forward, adding that mass US protests in recent days has added to the “menu of uncertainties” facing markets in 2020.
Julian Emanuel, managing director and chief equity and derivatives strategist at brokerage BTIG said in a CNBC interview Monday: “We have a lot of risks, we have a fragile recovery we are not even sure we had a recovery yet.”

As Volatility Continues to Subside, Nasdaq Reports Drop in May Volumes
Celeste Skinner – Finance Magnates
As volatility continues to lessen in the trading markets, Nasdaq has reported its volumes for the month of May, with the exchange operator revealing that it has yet again seen a drop in volumes. During the month, Nasdaq recorded a monthly trading volume of 181 million US equity options contracts. Against the previous month, which had a trading volume of 201 million contracts, May’s volume has dropped by around 10.0 per cent.

Relief rally or bear market bubble? For investors, it’s hard to tell
Saqib Iqbal Ahmed, Ira Iosebashvili – Reuters
What started as a bear market bounce in U.S. equities has transformed into one of the most dramatic rallies in memory, leaving investors looking to past rebounds, options markets and technical analysis for clues on how far it could run. The S&P 500 is up 37% since its late March close as of Monday and the Nasdaq Composite is near a fresh record after a surge that has seemingly ignored widespread economic upheaval and uncertainty over the coronavirus pandemic.

Open Interest in Ether Options Hits Record High on Deribit
Omkar Godbole – Coindesk
Derivative contracts on ether are more popular than ever, as evidenced by record open positions in options listed on the Panama-based derivatives exchange Deribit. Open interest, or the number of contracts outstanding and not yet liquidated by an offsetting trade, rose to a record high of $136 million on Monday, marking a 460% increase from $24 million seen on March 24, according to data provided by crypto derivatives research firm Skew.

Options, Futures Volumes Rise 17.3% in May
Traders Magazine
OCC, the world’s largest equity derivatives clearing organization, announced today that May 2020 total cleared contract volume was 545,272,318 contracts, up 17.3 percent from May 2019. OCC’s year-to-date average daily total cleared contract volume is 27,748,391 contracts, up 41.5 percent from 2019.

Exchanges and Clearing

OCC May 2020 Total Volume Up 17.3 Percent from a Year Ago
OCC, the world’s largest equity derivatives clearing organization, announced today that May 2020 total cleared contract volume was 545,272,318 contracts, up 17.3 percent from May 2019. OCC’s year-to-date average daily total cleared contract volume is 27,748,391 contracts, up 41.5 percent from 2019.

OCC Welcomes the Small Exchange
OCC, the world’s largest equity derivatives clearing organization, today congratulated the Small Exchange on its successful launch. With this newest addition, OCC now provides central counterparty clearing and settlement services to 21 exchanges and trading platforms for options, security futures, financial and commodity futures, and securities lending transactions.

Cboe Global Markets Acquires Trade Alert, Adding Real-time Alerts and Analytics to Information Solutions Offering
– Cboe Global Markets, Inc., one of the world’s largest exchange holding companies, today announced it has acquired the business of Trade Alert, LLC, a real-time alerts and order flow analysis service provider based in New York. Trade Alert will integrate with Cboe Information Solutions’ comprehensive suite of data solutions, analytics and indices that help market participants understand and access financial markets. Cboe’s Information Solutions offering is designed to optimize the customer experience throughout the life cycle of a transaction, from pre-trade to at-trade to post-trade, by providing insights, alpha opportunities, portfolio optimizations and seamless workflows. With Trade Alert, Cboe can deliver real-time trade data, market information and alerts, and Cboe content, including thought leadership, directly to customers.

CME Group Reports May 2020 Monthly Market Statistics
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today reported May 2020 market statistics, showing it reached average daily volume (ADV) of 17.9 million contracts during the month. Open interest at the end of May was 114 million contracts.

SGX announces launch of Singapore Single Stock Futures and signs MSCI Singapore licence agreement
Singapore Exchange (SGX) today announced that it will launch 10 Singapore Single Stock Futures (SSFs) on 15 June 2020, in response to growing client demand for a broader suite of Singapore-linked equities products. The list of underlying securities for the SSFs are Comfortdelgro, DBS, Genting, Keppel, OCBC, Singtel, Thai Beverage, UOB, Wilmar and Yangzijiang Shipbuilding. Most of these securities are also SGX MSCI Singapore Free Index (SiMSCI) stocks.


Gold Prices Are Headed for New Highs Amid Unrest. What Investors Should Do.
Steven M. Sears – Barron’s
As America burns, gold shines.
The traditional feel-good asset in times of economic duress is nearing a 52-week high as protests continue to erupt across the nation in response to the recent death of George Floyd while he was in police custody in Minneapolis.
Ever since, protesters have taken to the streets in major cities, including New York, Chicago, Portland, and even outside the White House in Washington, D.C. And in some cases, the gatherings have turned violent.

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