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Following a strong advance in 2025, Nasdaq-100 futures have entered a consolidation phase, marked by lower highs and higher lows, representing a pause in momentum as the market awaits a new catalyst.

Crude oil has broken decisively below a multiyear descending triangle, a pattern that had contained prices since the 2022 peak. The breakdown signals a loss of long-term support and reinforces the prevailing downtrend.

Despite strong gains in both gold and silver, the gold-silver ratio has fallen sharply, reaching levels last seen in 2012, which coincide with a major long-term support zone. A failure to break convincingly below this support could signal exhaustion and set the stage for a swift reversion in ratio.

The Japanese yen continues to weaken, trading near historical lows after a prolonged downtrend. While the trend remains negative, the chart suggests the risk of a sharp counter-trend reversal is rising.

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Following our last article, we entered 2026 with a constructive outlook. Inflation continued to moderate, easing pressure on real rates and debt servicing costs, while growth remained resilient enough to support earnings. Monetary policy had clearly shifted away from a hawkish stance. The prevailing assumption was that the policy backdrop would remain predictable, reinforcing a Goldilocks environment.

This framework supported a stable risk appetite. Equities continued to trade higher, credit spreads remained tight and volatility stayed subdued. Markets were operating under a coherent macro narrative, where moderating rates and steady growth reduced the need for defensive positioning.

That assumption began to weaken in early January. Despite lingering concerns around a fragile labor market, the shift did not originate from economic data. Instead, it stemmed from a sequence of geopolitical developments that reintroduced policy uncertainty into the market narrative.

The U.S. operation in Venezuela, including the capture of Nicolás Maduro and the subsequent handling of Venezuelan oil, was the first catalyst. While the direct economic impact was limited, it signaled a more assertive approach to U.S. policy. Shortly after, renewed tensions between the U.S. and Iran reinforced the change in tone. The situation did not escalate into open conflict, but it was sufficient to prompt further de-risking.

This heightened sensitivity left markets vulnerable. When tariff rhetoric between the U.S. and Europe resurfaced, linked to renewed tensions over Greenland, the reaction was outsized relative to the headline. U.S. equities sold off sharply, the dollar weakened and U.S. Treasury yields moved higher in a disorderly fashion. As much as tariff threats and retaliation risks played a role, the cross-asset response itself marked an important shift.

Rather than a conventional risk-off move, markets appeared to be reassessing confidence in U.S. policy and institutional stability. A simultaneous weakening in equities, bonds and the currency pointed to hedging of U.S. exposure rather than a temporary growth scare.

This dynamic reinforced bullish momentum in precious metals as hedges against policy uncertainty. Gold, despite already trading near record highs, continued to attract demand. Silver, however, outperformed more aggressively, pushing the gold-silver ratio sharply lower. With underlying economic fundamentals not deteriorating materially, the divergence in momentum suggests a relative overshoot rather than a structural shift, implying scope for partial normalization ahead.

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We conclude with the following hypothetical trades:¹

Case study 1: Long Gold-silver ratio spread

If you hold a bullish view of the gold-silver ratio, you could consider buying one Gold (GC) futures contract at the current price of $4,880 and selling one Silver (SI) futures contract at the current level of $94.50, with the ratio at 4,880 / 94.5 = 51.64. We would place the stop-loss below 45, a hypothetical maximum loss of 51.64 - 45 = 6.64 points. Since the contract size of Gold and Silver contracts are 100 and 5,000 troy ounces respectively, the sizing required to match the notional values would be:

• Gold leg: 4,880 x 100 x 1 = 488,000
• Silver leg: 94.5 x 5,000 = 472,500

We can look at two hypothetical scenarios to understand the approximate dollar amount of a one point move in the ratio.

Scenario 1: Assuming gold stays unchanged and silver falls to $92.70, the ratio becomes 4,880 / 92.70 = 52.64. The overall profit, which comes from the silver position in this case, is (94.5 – 92.7) x 5,000 x 1 = 9,000 USD.

Scenario 2: Assuming silver stays unchanged and gold falls to $4,785, the ratio becomes 4,785 / 94.5 = 50.64. The overall loss, which comes from the gold position in this case, is (4,785 – 4,880) x 100 x 1 = 9,500 USD.

In Scenario 1, the ratio rises by one point, yielding a profit of $9,000 from the short silver position. In Scenario 2, the ratio drops by one point, yielding a loss of $9,500 from the long gold position. This ratio spread can be traded using Micro Gold (MGC) futures at 1/10 and Micro Silver (SIL) futures at 1/5 of their standard-sized contracts and point value. This would then require a size of two Micro Gold to one Micro Silver.

Case study 2: Long Japanese Yen futures

If you hold a bullish view of Japanese yen, you could consider taking a long position in Japanese Yen (6J) futures at the current price of $0.006362, with a stop-loss below $0.00625, a hypothetical maximum loss of 0.006362 – 0.0062 = 0.000162 points. Looking at Figure 4, the Japanese yen has the potential to rise back to its resistance at $0.0072, resulting in 0.0072 – 0.006362 = 0.000838 points. Each point move in the Japanese Yen futures contract is 12,500,000 JPY.

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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.

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