It has been a week characterized by high volatility and rather large moves in several asset classes, albeit for different reasons. On the one hand, the equity and bond sectors posted notable gains, mainly due to the positive inflation outlook.

On the other hand, the downright disastrous performance of Bitcoin and cryptocurrencies was due to a wave of selling caused by fears of a possible default of FTX, one of the world's largest crypto exchanges.
To learn more about how the markets are moving and the volatility trend, don't miss our weekly overview!

Enjoy the video!

Transcription

Hey guys and welcome back! One of the coaches at Unger Academy here, and this is our usual chat, as you know, that we have on weekends to talk together about the performance of the markets over the week.

Well, it has been an exciting week, full of volatility and interesting insights that we’re going to be analyzing together.

Alright, so as I said in the introduction, we experienced a week of pretty high volatility in different asset classes and for various reasons.

Particularly in equity indexes and bonds, as we know, this volatility is mainly due to better-than-expected inflation data, which seems to be pointing to a slowdown in the rate increases decided by the Fed.

We also saw volatility in the metals market and, most of all, in currencies and cryptocurrencies.
Bitcoin has fallen sharply this week, while traditional currencies have rallied very strongly.

But let's go in order and let's start with the equity markets.
Right now, the Nasdaq is gaining almost 7% on a one-week horizon.
The Mini SP is gaining +5%.
The European stock exchanges are also doing well, with a+ 5.49%, so almost +5.5% for the Dax.

Now, what immediately jumps out at you is the very high volatility.
For example, if we have a look at the historical volatility of the Nasdaq. It's at 100%, so the highest percentile, over the past month. And it’s very close to the highs on an annual basis as well.
The same is true for the Mini SP 500.
While we see much lower volatility in the European stock exchanges.

So what does this factor depend on?
Well, mainly on the fact that the European stock exchanges have had better returns than the U.S. stock exchanges over the past months.
Let’s go take look at the three-month returns, for example.
The Nasdaq is losing -15%, while the EuroStoxx is gaining +2%.
If we look at the chart of the EuroStoxx, we see a return of +1.70%.

We see that the recent lows of this market have slightly broken in the March lows and then made a big jump, okay?
On the other hand, the Nasdaq is still well below the lows recorded in March.
So, yeah, clearly, there’s a big difference in performance between the U.S. and European stock exchanges.
Of course, this also depends on the policy of the central banks.

And that’s primarily why we’re seeing higher volatility in the U.S. stock indexes compared to the European ones.

So as I said, this week the bonds also performed very well, again because of the interest rate issue.

We’re seeing a nice bounce in the T-Bond (the 30-year U.S. bond) which is up +3.11% right now.
The 10-year also did well, +1.80%, and the same goes for the European Bund.
Let's see what… let's see if this is the end, let's say, the possible end of a cycle of rising and falling prices of bonds.

As you know, futures contracts move sometime before the central bank actually makes a decision, which means they move according to a general expectation and forecast.
So we'll see if we’re actually close to the bottom.

Moving on to the energy sector... And hey, this week almost all markets here are down.
Especially Heating Oil, which was the future that had gone up the most recently.
It was very close to the highs of June. And so, it’s also the future that is losing the most at the moment.

On the other hand, the metals sector is doing pretty well.
Let's take a look at that. Platinum is up +9.30% at the moment.
But yeah, actually all the metals are doing more or less well this week.
For example, we see that Silver us up +3.60%. Copper up +4.80% and Gold up by +5%, and we see that it has been going up quite well in the last period.

As for livestock, there’s really not much to report.
It’s one of the most stable markets this week.

Let's move on to the soft commodities… Well, this week we see a nice rise in Sugar, +5.77%, so a nice leg up.
And the same goes for Cocoa.

On the other hand, as far as Grains are concerned, we’ve seen a -4.80% drop in Wheat, which has already paid off all the past price increases related to the conflict between Russia and Ukraine.

Let’s turn over to the other sector that has moved very much over the past few days which is… currencies.
We have a huge recovery of all currencies against the U.S. dollar.
In particular let's look at the Euro FX future, which is at 1.0330 at the moment, so we've seen a really remarkable rise in the last five days.

Of course, these are obviously not traditional returns for currencies, which generally have lower volatility than commodities and smaller movements.
But we’re seeing extensive returns this week that are unusually high for this type of asset class.
Also recovering very well is the Yen, which was one of the weakest currencies against the US dollar.

And finally, here we are - the disaster of cryptocurrencies.
Bitcoin is now losing -25%, with volatility levels that have obviously reached an all-time high.

If you've been following the cryptocurrency market a bit, you'll certainly already know that this fall depends on the now likely, I’d say, default of FTX, one of the largest cryptocurrency exchanges, perhaps the second greatest one after Binance.
And obviously, this has triggered concerns and waves of selling across the cryptocurrency industry.

So, if it's true that Bitcoin has been consolidating in this trading range, I’d say that it's pretty apparent that by now this trading range has been broken to the downside.
So the cryptocurrency sector is still in a significant crisis, exacerbated by the likely default of the FTX exchange.

Let's also have a look at the implied volatility, so the implied volatility term structure as measured by the volatility index on SPX, which is the SP 500.
We have a term structure that I’d say is now in full contango.
And that's the traditional structure when there’s no particular disruption in the stock market.

We also have a VIX value that is at the lower end of the price range we had in the last 6-8 months.
So, I’d say that traders aren’t particularly worried about the future direction of the equity markets right now. Which is good.

Okay, so finally, let's take a look at the rollover calendar scheduled for next week.
November 14th is the recommended rollover date for Cotton futures.
While November 16th is the recommended date for rolling over Crude Oil.

And that's it.

Guys, before I say goodbye, I want to remind you that if you are interested in systematic trading, you can go and watch a free presentation by Andrea Unger.

I’m just going to leave you the link in the description of this video. And in this presentation, Andrea Unger will explain his trading method, which he used to win the World Cup Trading Championships in real-money trading four times.

From the same link, you can also get the best-selling book "The Unger Method," by covering only the shipping costs, or you can even book a free strategy consultation with a member of our team.

So, please take advantage of it!

And that is it for today!

Before we say goodbye, leave us a like please if you enjoyed this video. And don't forget to subscribe to this channel and go and click on that bell!

Have a great weekend everyone, I will see you next week! Bye Bye!

NEXT UP ON THE BLOG

World Cup Award Ceremony

Interviews

Read More...

---

Robbins-PFGBEST World Cup Trading Championship Awards Presentation at CME Group

Interviews

Read More...

---

On forex markets - Dukascopy

Interviews

Read More...

---