The opinions expressed in this report are those of Inspirante Trading Solutions Pte Ltd (“ITS”) and are considered market commentary. They are not intended to act as investment recommendations. Full disclaimers are available at the end of this report.

Executive Summary

In the latest report, Inspirante Trading Solutions draws lessons from the 1990s to navigate the uncertainty arising from an array of mixed economic signals and the upcoming presidential election. While the market sentiment has been overly optimistic to price in an easing scenario, caution is warranted in the current atypical easing cycle.

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Upcoming economic events (Singapore Local Time):






U.S. Michigan Consumer Sentiment Index (May)



China CPI (Apr)



U.S. CPI (Apr)



U.S. Retail Sales (Apr)



China Retail Sales and Industrial Production (Apr)


Investors are closely watching the latest inflation numbers, especially in the U.S., to see if the uptick in March continues.

Markets in focus

Figure 1: E-mini Nasdaq-100 Futures (Weekly)

The Nasdaq-100 index recently reached a new all-time high. However, the current pullback threatens the ascending trend support since early 2023.

Figure 2: E-mini Dow Jones Futures (Weekly)

Similarly, the Dow Jones Industrial Average also recorded its all-time high and is currently trading within a two-year ascending channel.

Figure 3: Nasdaq / Dow ratio (Monthly)

The ratio between the Nasdaq and Dow Jones indices is approaching a historical peak. Notably, previous instances when the ratio reached similar levels—such as during the DotCom bubble and December 2021—were followed by sharp reversals back to the long-term uptrend line.

Figure 4: U.S. 10-Year Treasury Yield (Monthly)

The U.S. 10-Year Treasury Yield is experiencing a resurgence. On a longer timeframe, it exhibits a rare monthly Relative Strength Index (RSI) divergence; despite higher highs in yields, the RSI prints lower highs, indicating diminishing momentum. Historically, similar patterns preceded significant declines in yields.

Figure 5: Silver Futures (Weekly)

Silver has decidedly broken out from a multi-year triangle and a significant resistance at 26. Following a brief pullback, it is now retesting this former resistance, acting as support. Should this support level hold, an upward continuation is anticipated.

Our market views

From 1994 to 1998, then under Federal Reserve Chairman Alan Greenspan, the central bank adopted what is known as an opportunistic approach to disinflation. This strategy involved not actively fighting inflation with tight monetary policies unless deemed necessary, even though inflation is moderate but still above the long-run objective. Instead, the central bank waited for external circumstances, such as economic recessions or favorable supply shocks to naturally lower inflation. Then it maintained the lower inflation level without aggressively targeting further reductions unless inflation rose significantly. In July 1995, for instance, the Fed reduced the interest rate by 75 basis points and maintained this rate for over 30 months, effectively fine-tuning rather than overhauling monetary policy.

Fast forward to the present, there are indications that the Federal Reserve, currently under Chairman Jerome Powell, may be adopting a similar strategy in response to today's increasingly complex macroeconomic landscape. On the one hand, signs such as a disappointing Non-farm Payroll report for April, with fewer jobs added than expected and a rising unemployment rate, suggest the U.S. could be nearing a recession. Concurrently, earnings reports from major companies like Starbucks, McDonald's and Yum! Brands show declining sales and a pullback in consumer spending. On the other hand, despite these economic slowdown signals, the Equity market, as evidenced by the S&P 500, remains close to its all-time high, buoyed partly by expectations of rate cuts, even as the inflation rate rose to 3.5% in March—significantly above the Fed's target.

This situation presents a critical dilemma for the Fed: easing monetary policy too soon risks a repeat of the 1980s, when a secondary inflationary wave surged higher ; easing too late, however, could stifle discretionary spending further, potentially dragging the economy into a deep recession, even as it curtails inflation. Adding to the complexity is the impending U.S. presidential election. Although Chairman Powell has asserted that the election will not influence the Fed's policy decisions, the central bank is undoubtedly keen to avoid both a resurgence of inflation and a deep recession during an election year.

The Federal Reserve's communication has been explicit in conveying these concerns. Fed Governor Chris Waller, commenting on the current atypical easing cycle, remarked, "I see no reason to move as quickly or cut as rapidly as in the past." From this perspective, we believe that the U.S. Equity market—particularly the technology sector and growth-oriented stocks, which typically benefit from low interest rates and economic expansion—is still overly optimistic, pricing in an aggressive easing scenario over the next six to 12 months. As the Fed navigates these turbulent waters with caution, striving  to maintain a delicate balance in its policy approach, these high-multiple, growth stocks are likely to underperform compared to value stocks, which are generally more defensive and resilient in such environment.

How do we express our views?

We consider expressing our views via the following hypothetical trades1:

Case study 1: Short Nasdaq/Dow ratio

We would consider taking a short position in the Nasdaq/Dow ratio by simultaneously selling one Micro E-mini Nasdaq-100 futures (MNQM4) at 17,770 and buying two Micro E-mini Dow  Jones futures (MYMM4) at 38,620, with an effective price ratio of 17,770/38,620 = 0.46. We would put a stop-loss above 0.475, which could bring us a hypothetical maximum loss of 0.015 points. Looking at Figure 3, the ratio has the potential to fall to its long-term trendline support at 0.36, a hypothetical gain of 0.10 points. Each point moves in the Micro E-mini Nasdaq-100 futures contract is 2 USD, and each point move in the Micro E-mini Dow futures contract is 0.5 USD. Both legs have similar notional values (Nasdaq: 17,770x2 = 35,540  USD and Dow: 38,620x0.5x2 = 38,620 USD). We can look at two hypothetical scenarios to understand the approximate dollar value of a 0.001 point move in the ratio.

Scenario 1: Assuming the Nasdaq stays unchanged, and the Dow rallies to 38,714, the ratio becomes 17,770/38,714 = 0.459. The overall profit, which only comes from the Dow position in this case, is (38,714– 38,620)x0.5x2 = 94 USD.

Scenario 2: Assuming the Dow stays unchanged, and the Nasdaq rallies to 17,804, the ratio becomes 17,804/38,620 = 0.461. The overall loss, which comes from the Nasdaq position in this case, is (17,770-17,804)x2 = -68 USD.


Sell 1 MNQM4

Buy 2 MYMM4



Scenario  1

17,770 (unchanged)

38,620 -> 38,714

17,770/38,714 = 0.459

(38,714–38,620)x0.5x2 = 94 USD

Scenario  2

17,770-> 17,804

38,620  (unchanged)

17,804/38,620 = 0.461

(17,770–17,804)x2 = -68 USD

In Scenario 1, the ratio drops by 0.001 points, yielding a profit of 94 USD from the long Dow Jones position. In Scenario 2, the ratio rises by 0.001 points, yielding a loss of 68 USD from the short Nasdaq position. There is margin offset for Nasdaq/Dow ratio spreads.

Case study 2: Short U.S. 10-Year Yield Futures

We would consider taking a short position in the U.S. 10-Year Yield futures (10YK4) at the current level of 4.5, with a stop-loss above 4.8, which could bring us a hypothetical maximum loss of 4.8–4.5 = 0.3 points. Looking at Figure 4, the U.S. 10-year yield has the potential to fall to 3.8, the previous low registered in December 2023, a hypothetical gain of 4.8–3.8 = 1.0 point. Each point move in the 10-Year Yield futures contract is 1,000 USD.

1 Examples cited above are for illustration only and shall not be construed as investment recommendations or advice. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. Please refer to full disclaimers at the end of the commentary.


This publication is provided by Inspirante Trading Solutions Pte Ltd ("ITS") for general information and educational purposes only. ITS is NOT licensed or regulated for the provision of investment or financial advice, and we do not seek to do so.

Any past performance, projection, forecast, or simulation of results is not necessarily indicative of the future or likely performance of any investment.

Any expression of opinion, which may be subject to change without notice, is personal to the author, and ITS makes no guarantee of any sort regarding the accuracy or completeness of any information or analysis supplied.

None of the information contained here constitutes an offer or solicitation of an offer to buy, sell or hold any currency, product, or financial instrument, to make or hold any investment, or to participate in any particular trading strategy.

ITS does not take into account your personal investment objectives, specific investment goals, specific needs, or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here. Suitable advice should be obtained from a licensed financial advisor for this purpose. The information and publications are not intended to be and do not constitute financial advice, investment advice, trading advice, or any other advice or recommendation of any sort.

ITS shall not be liable for any loss arising from any investment based on any perceived recommendation, forecast, or any other information contained here. The contents of these publications should not be construed as an express or implied promise, guarantee, or implication by ITS that the reader will profit or that losses in connection therewith can or will be limited from reliance on any information set out here.

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The opinions and statements contained in the commentary on this page do not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs. This content has been produced by ITS, CME Group has not had any input into the content and neither CME Group nor its affiliates shall be responsible or liable for the same.



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