Markets: Crypto Up Again

by Francesco Placci

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The most relevant events of this week include the attempt of the stock indexes to recover from the last week’s downtrend and the rise of the energy markets, of Cotton, and of Bitcoin, which reached +13%.

It’s also worth noting the behavior of implied volatility, which seems to suggest that the market wasn’t too worried about last week’s downtrend.

To learn more about how the markets moved over the last few days, watch the video!

Transcription

Hello guys, and welcome back to this weekly chat on the markets!

So let's start talking about what happened on the markets this week.

As you can see in the chart, some stock indexes are trying to react in a bullish way to that small drawdown of about 5% that occurred recently. This is Nasdaq, and this is Mini S&P.

On the other hand, Bonds are going down. In fact, they’ve broken through the trading range in which they have been for some time, probably due to spreading rumors of a possible rise in rates (they have been talking about it for a while in the US).

Now let's take a look at the Energy market. As you can see, all these markets continue their upward race. In particular, Crude Oil has broken its recent highs; RB is also setting new highs; and here’s obviously Natural Gas, which has reached extremely high levels compared to three months ago.

So the entire energy market is still very strong. On the other hand, although the Metals market has been recovering this week, if you look at its medium-long term trend, you’ll see that it’s still in a downtrend.

The returns of the Meats are good - look for example at Live Cattle and Feeder Cattle. However, if you look at their trend over the last three months, you’ll see no significant positive or negative returns, so we can say that the Meats are currently sideways.

Soft Commodities... Okay, we definitely need to mention Cotton because in the last sessions it literally surged, almost as if it were a cryptocurrency!

Finally, here are the Cereals. As you see, there are both positive and negative markets. The winner is without a doubt Soybean Oil, with almost +7% in the last 5 days.

Let's take a look at Currencies. The Euro-Dollar is still weak and is now approaching 1.15.

Finally, it is certainly worth mentioning the performance of Bitcoin, which hit +13% this week. And look at that nice breakout it had over the last five days. It has certainly reached important levels (the price of the future is now $54,000), so let’s wait and see if it’ll be able to set new historical highs.

Let's now talk about volatility. Currently, we are in a particular situation because if you look at the short-term historical volatility of stock indexes, you’ll see that the volatility is very high, and it's all at the hundredth percentile. Of course, long-term volatility is a bit lower, but in general, we can say that the downtrend that occurred in the markets last week clearly caused a widening in the range of the daily bars. However, the impact on implied volatility, which is the one that somehow measures the fears of the market, is less remarkable. 

As you can see, the volatility structure of the SPX index is still completely in contango, so it really seems that that recent downtrend didn't cause much fear in the markets.

Long-term volatility is the only one that seems to continue rising in a more or less steady way. As you see, all in all, the VIX is at fairly typical values compared to those we’ve seen in the last 5-6 months, so there's still no fear in the markets.

Let's take a look at the rollover calendar. Ok, there are no futures to roll over next week. The only one that is close to expiration is Crude Oil. It will expire on October 20, and you'll be able to roll it over starting from next Friday. 

Ok, guys! That's all for today.

And see you next time, goodbye everyone!

 

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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.