Markets: Dollar Gets Stronger, Bonds Still Dropping

by Francesco Placci

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Over the last few days, we've witnessed a setback in the rise of two markets that are highly affected by the current conflict between Russia and Ukraine: Natural Gas and Wheat. Natural Gas fell by more than 6% (although it has risen 130% over the last 3 months) while Wheat fell by 2.3%.

Other markets that closed the week with declines include the bond sector, which continues to record negative returns, American equity indexes and metals. 

On the other hand, European stock indexes and the dollar, which affirmed its strength against other currencies, rose.

To learn more about how the markets are moving and the volatility trend, don't miss our weekly overview!

Enjoy the video!

Transcription

Hi guys! Welcome back. One of the coaches of Unger Academy and this is our usual chat we have on weekends about how the markets have moved over the last few days.

Alright, so let's start as usual with the stock indexes, where we see some mixed returns over the past five days.

In fact, whereas the European stock indexes are positive, the US indexes are negative, especially the Nasdaq, which went down by 1.70%.

As for volatility, we do see that it has been decreasing over the last month but, as you can see, the percentile values are still pretty high.

The one-month and three-month returns for all these markets, so both the European and the US stock indexes, are negative. So we can definitely say that 2022 didn't start in the best way for these markets.

The same goes for the Bonds. I mean, perhaps the situation here is even worse. In fact, we've seen the bonds falling week after week.

And this week, too, we see negative returns for the T-Bond and the 30-year bond. The US 10-year bond is also negative, as well as the European 10-year bond, so the Bund, which fell by 1.60%.

As for the energy sector, on the other hand, we see that Natural Gas went down. It was at overbought extremes, so let's hope that this downward movement won't be followed by another uptrend.

This week we see a decrease in the price of other energy markets as well, especially oil derivatives. If we take a look at Crude Oil, we see that it has lost around 10% over the past month.

However, we are still at very high levels. I mean, look at the three-month and one-year returns. We are talking about +130% for Natural Gas, +165% for Heating Oil, and 80% for Crude Oil. This makes it clear that there's still extreme tension in the energy market.

As for the metals, we see negative returns everywhere. These markets have been pretty weak for some time, and even if they are safe haven assets - especially gold - they have not shown any particular signs of a price increase in the last period.

Well we see mixed returns on the Meats. 

The Soft Commodities are negative with the only exception of Coffee. Orange Juice is still at very high levels, and the same goes for Cotton, so even if they went down this week, they are both in a strong uptrend.

The Cereals went up a lot. The Bean Oil, in particular, has gone up by +6% this week and is now on the highs of the recent period.

In general, we can say that when it comes to Soft Commodities and Cereals, three-month and one-year returns are certainly very remarkable. For sure the recent tensions deriving from the war between Ukraine and Russia are having an impact on these markets.

Let's take a look at the currencies, where we have a completely different picture. We see that the color red reigns everywhere. This means that the dollar is getting stronger than the other currencies.

In particular, let's look at the euro-dollar, which is currently at a level of 1.0839. So not much has changed since last week. Certainly the dollar is showing signs of strength against all other currencies.

As for Bitcoin, well nothing new to report this week. It went up by just +1.38%, so it moved very little. And it is still in its usual trading range. We can say that the cryptocurrency market is still pretty weak and currently, there are no signs of an imminent recovery.

Finally, if we take a look at the volatility term structure, we see that there has been an increase in volatility this week, although to be honest it was very slight. The Vix is at 23.77, so it has a low percentile value compared to the last three months.

Anyway, the volatility term structure is still in contango. I remind you that this means that the short-term volatility - and we can see it from this indicator, this white historical series - is lower than the long-term volatility. So here we have the Vix, the Vix at 3 months, the Vix at 6 months and the Vix at one year.

So as you can see, at the moment the short-term volatility is lower than the long-term volatility, which is the classic structure of the stock market volatility when there is no tension.

So at the moment, despite the war and despite inflation and fears of rate hikes, stock indexes are not particularly affected. So the Vix index and the other volatility indexes are not suffering from the current situation.

There's seems to be an apparent calm in the markets although the macroeconomic situation is definitely not a good one.

Let's move on to the rollover schedule for the next week. There will be several rollover to be performed on the 26th of April. We'll have meats, soft commodities, metals and finally energy markets, with Heating Oil and Gasoline.

And then on April 27, we'll have to roll over Bitcoin and Ethereum futures.

Okay guys, before saying goodbye I leave you a link which you can find in the description of this video. I'm sure it will be very useful especially for those of you who are interested in systematic trading. Through this link you'll be able to watch a free presentation by Andrea Unger, who will introduce you to his trading method, which allowed him to win the world championships in real money trading 4 times. In addition, you'll be able to get also our best-selling book, "The Unger Method", covering only the shipping costs. And finally, you'll also have the possibility to book a free call with a member of our team.

And with that the video is over! But just one more thing, please leave us a Like if you liked this video and of course subscribe to our channel.

Have a great weekend, and I will see you again next week. Bye-bye!

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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.