5 Things to Know About the Markets This Week - Trends, Volatility, Crypto and more

by Francesco Placci

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Like every Saturday, here's our overview of how the markets moved this week.

Unlike last week, which certainly was quite turbulent, the markets have been much calmer in recent days, as shown by both the term structure of implied volatility, which has returned to contango, and the values of Vix, which went down considerably.

Among the markets that end the week higher, there are stock indexes and Crude Oil and its derivatives, whereas among the markets that end the week lower, there are Natural Gas (which has been falling for two weeks now), Soybean Oil, and Bitcoin.

For more detailed information on how the markets moved this week, check out our overview.

Enjoy!

 

P.S. In the video, we also make a summary of the rollovers coming up for next Friday, which, as you know, will be the three witches' day.

 

Transcription

Hey everyone, welcome back! 

One of the coaches of Unger Academy here, and this is our weekend chat about what happened on the financial markets during the week.  

This week, stock indexes performed pretty well, bouncing from last Friday's lows and making returns that range from 3 to 3.5%. In this chart, you can see the Nasdaq, which at the moment, is quite close to its recent highs. And the same goes for the Mini S&P 500, as you see.cEuropean stock indexes, on the other hand, performed a bit worse. And in this chart, you see the EuroStoxx50 and the Dax.

An important thing to note here is the increase in historical volatility that's taking place on all the stock indexes. We are at the 100th percentile in the short term, and we are also very close to the same values in the long term. For example, we are on the 100th percentile for the Eurostoxx 50.

Below you see a chart of the historical volatility on a one-month timeframe, and as you can see, we are close to the highs of this period. 

On the other hand, the bonds are falling. The T-Bond has lost 1.5% over the last 5 days, while the TY lost 0.66%. The German 10-year bond did a bit better instead.

As for the energy sector, Crude Oil and its derivatives performed pretty well this week, with Heating Oil and RBOB Gasoline earning 6-7% and 8.8%, respectively. On the other hand, Natural Gas has been falling for two weeks now.

Let's move on to the other markets, although there's not much to say here. We see some mixed returns on the Metals sector.

And as for the Meats, we have a -3% for Lean Hogs. As for Soft Commodities, Sugar and Orange Juice performed pretty well.

There's really not much to say about Cereals either, except for Soybean Oil, which ends the week lower by 5% and is at a support level that seems to be quite significant now.

As for currencies, we can see that the Euro-Dollar is still 1.13, exactly as last week. 

However, what's more interesting instead is the trend of Bitcoin. Last week, the prices of Bitcoin were in this support area, and we said that there was a volatility compression going on that could be followed by a volatility explosion. That explosion has actually taken place this week, and now the value of Bitcoin is around 48,500$, which means that this cryptocurrency has lost 9.33% over the last 5 days.

At the beginning of this video, we have already seen that the volatility of stock indexes is on the rise despite the fact that stock indexes went up this week.

On the other hand, if we look at the implied volatility, we can see that it's slightly decreasing. The term structure is back in contango now, which is the natural structure of the stock indexes when there are no disruptive events in the markets. As you can see, we've gone through a couple of tough weeks, but the calm seems to have returned. The Vix value has also returned to much more normal values, going down from 35 to 20. So, for now, there seem to be no particular worries about how the markets will move in the future.

Now let's move on to the rollover calendar. Next Friday will be Three Witches' Day, which means that stock index futures, stock index options, and stock options are getting closer to expiration.

We have already rolled over the US stock indexes, and now we'll have to roll over the futures on the European stock indexes. In addition to them, it will also be advisable to roll over the Crude Oil future, which is also getting closer to its expiration. So on December 15, it will already be possible to roll over the Crude Oil future.

Finally, guys, if you want to learn more about the Unger Academy and how we teach trading following the method of the only 4-time world champion of real-money trading Andrea Unger, we're going to leave a link in the description of this video. It'll take you to a free webinar in which Andrea explains a lot of what he's learned about the markets and, at the same time, will help you understand the basics of his method. So if you're interested in systematic trading, you simply cannot miss out on this video.

That's it for this week. Have a great weekend, and we'll see next week. Bye-bye for now!

 

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Francesco Placci

Hi, I'm Francesco Placci, a professional trader since 2005 thanks to the systematic approach to the markets.

My skills range from trading on index futures to bonds, from stocks to commodities, with a particular focus on volatility and options, which I consider to be among the most versatile and fascinating instruments available to traders.

After an experience with leading Italian credit institutions where I learned the basics of institutional finance, I became a successful independent trader, with great personal satisfaction.

Founder of Algoritmica.pro, in 2019 I joined Unger Academy as head of Research and Development.