Markets Update: New Interest Rate Hike Affects Bonds & Stock Indexes, Commodities on the Rise

by Andrea Unger | The Trading Show

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The weakness of bonds continues and is partly due to this week’s Fed interest rate hike, the sixth since early 2022. The rate hike also negatively impacted U.S. stock indexes, which closed lower, in contrast to European stock indexes, which instead posted positive weekly returns.

Also on the rise were most commodities, from metals to Softs. Cotton was particularly noteworthy among the latter, with a five-day return of more than 20%.

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

Enjoy the video!

Transcription

Hello guys, welcome back! One of the coaches at Unger Academy here, and this is the usual chat that we have on the weekends to evaluate together the performance of the markets.

Okay, so, look, I’d say that it's been a pretty busy week in the markets.
We see several large movements, for example, +21% in Cotton or -5.70% in the Nasdaq.

But let's go and proceed in order and look at the stock indexes first. As I said, the Nasdaq lost -5.72% over the last five days, with volatility at an all-time high.
I'm talking about short-term historical volatility now. And indeed, we see that we are at the 100th percentile in the short term.
As far as the long-term volatility is concerned, it is still pretty high, especially for the U.S. indexes, while it’s much lower for the European indexes at the moment.
European indexes that have had positive returns this week, unlike the U.S. stock indexes.
The Mini SP 500 that's losing about 3% right now.

But let's move on to the bonds, where we see negative returns again this week.
In particular, the T-bond, which is losing 1%.
Also, we have a -0.68% on the 10-year bond.
And the German Bund is also losing -1.51%.
So, the downward trend in bonds continues.

And well, we know that the Federal Reserve raised interest rates by another +0.75%, as expected.
And there’s no sign that this rate hike will end in the short term.
So, this is a little bit of the driver that’s pushing bonds and US stocks down.

On the other hand, as far as the energy market is concerned, the whole sector has performed pretty well.
In particular, we have a +7.88% in Gasoline.
Natural gas is up by +5%.
+3.70% for Heating Oil and +5.13% for Crude Oil.

Let's take a look at the most impressive gains in the energy sectors are definitely the ones that we are seeing in Heating Oil, which, if we look at a slightly longer-term time frame, is above the recent highs.

As for metals, we also see upward trends in this sector, which has definitely not been one of the best performers lately.
However, this week we do have a +7% in Silver, which it made almost exclusively today.
+6.89% in Copper and more modest returns for Platinum and Gold.

Let's turn to Livestocks, there’s a decline in Lean Hogs of -3.68%.

As for soft commodities. Hey, here we can see some pretty high volatility.
Let's take a look in particular at Cotton, which just marked +21.5% this week.
Also up strongly was Sugar and especially Orange juice, which broke through all the highs, and has been in this strong uptrend for quite some time now.
Cocoa is also doing well, at +5%.
So this was undoubtedly one of the most volatile markets this week.

On the other hand, as far as Grains are concerned, it certainly is worth noting the performance of Bean Oil, which has very interesting returns on both a five-day and one-month, as well as a three-month and one-year view.
Certainly it’s developing a strong uptrend and is back on track towards the highs that were reached in May.

Let's move to the currencies now. We have a Euro-Dollar that is currently worth 0.9964.
And yeah, there's been a slight decline compared to last week.
We also have a British Pound that is down this week, -2.5%.
And this is a setback because as you remember, it was recovering but then in the last five days it has lost -2.5%, which is rather significant with regard to movements in currencies.

And then finally, let's have a look at Bitcoin, which is up +2.90% this week. So it’s showing signs of revival, but as we know, it’s still within the same trading range.
And until it moves out of that price area, you can’t say that the downtrend has been broken.

Finally, let's look at the volatility term structure measured using the Volatility Indexes for the SP 500.
Here we can see a structure that is in contango, except for the short-term volatility, which is this white line, which isn’t the lowest of all.
Let me remind you that we talk about contango when the short-term volatility is lower than the long-term volatility.
And this is the characteristic structure that stock markets have when there’s no turbulence.
So, right now we're in a relatively calm situation, even though the stock indexes have had a pretty volatile week.

And if we take a look at the Vix, if we look at the current value of 24.04, it’s in the lowest range of values that have been reached in the last nine months.

Okay, so let's now turn to the rollover schedule for next week.
We start on November 8, when we'll have to rollover the Cocoa futures.
Then on the 9th, we'll have to rollover the Vix futures.
And then on November 10, the rollover on Coffee.

Well, guys, before I say goodbye, I'd like to leave you with some advice.
If there is anyone among you who's interested in systematic trading, I recommend that you click on the link in the description of this video. From there it'll take you to a page where you can watch a free presentation by Andrea Unger, the only four-time World Trading Champion in real-money trading, by the way, who will introduce you to his trading method that is called the Unger Method.
And from that same page you can also get the best seller, "The Unger Method," covering only the shipping costs, or even book a free strategy consultation with one of our tutors.

And that is it all for today guys.

Please don't forget to subscribe to our channel, click on the notification bell and leave a Like if of course you enjoyed this video!

I wish you a pleasant weekend ahead and I will see you soon next week, bye bye for now!

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Andrea Unger

Andrea Unger

Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.

I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems. 

In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.

Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.

Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.