Santa Claus Rally - Are Markets Trending Upward? Stock Indexes Rebound

by Francesco Placci

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Is the Santa Claus rally finally here?

Most sectors ended the week up in the days leading up to Christmas. From the stock indexes (which finally recovered after last week’s downtrend) and energy markets (except Natural Gas) to metals and cereals, we can see a majority of rising markets. In fact, only bonds, some soft commodities and some currencies trended downward.

If you want to learn more about the market trends of the last few days, the situation of volatility, and the rollovers calendar for the next week, watch our weekly overview!

Enjoy… And we wish you a Merry Christmas! 🎄 🎅

P.S. Since many exchanges will be closed next week and the volumes will be very low, this weekly overview will be back in two weeks…

Transcription

Hey everyone! One of the coaches of Unger Academy here, and this is the usual chat that we have every week about the market trends.

Okay, so this was a short week. As you know, December 24 is a holiday for all exchanges, which means they are closed, and December 23 is the last trading day of the week.

As for the coming holidays, I invite you to check out which exchanges will be closed next week, and on which days. For example, the Canadian, British, and even some Asian markets will be closed, so please go and check it out.

Alright, let's start with our overview and see how the stock indexes performed over the last four days. Let's start with the Nasdaq, which gained 2.30% this week. The Mini S&P 500 also did well, gaining 1%, and the European stock exchanges performed well too. The only index that performed a bit worse is the DAX, which went up by only 0.55%.

Let's take a look at the volatility of stock indexes. As you can see, volatility is still very high in the short term. It's on the 100% percentile, which means that it's at the maximum levels. You can also see it from the standard deviation chart below. 

If we look at the volatility trend over a time horizon longer than one year, even in this case, we can see that the volatility is close to the maximum percentile. So the volatility of the stock indexes is still very high.

Okay, since we're talking about volatility, let's also look at the trend of implied volatility. It's still relatively high if we compare it to the average values of the recent periods. However, compared to the values that we saw last week we can definitely observe a decrease in volatility. The term structure is now entirely in contango, which is the structure of volatility in normal conditions. The VIX is also going down at the moment. So while last week we could still be worried about a possible deterioration of the situation, to date, such concerns seem to have disappeared.

Now let's move on to the other asset classes. We can see that bonds went clearly down, especially the T-Bond, which lost about 1%.

The energy sector did well with Natural Gas as the only exception. In fact, we see that Crude Oil went up and Heating Oil rose as well.

The Metals market is all positive. The most eye-catching performance is that of Platinum, which gained 4%.

As for the Meats, Lean Hogs went up by over 4% this week, while in the Soft Commodities sector, Orange Juice continued to rise, and as you can see, it made a rather interesting rally over the last two weeks.

The Cereals sector is also very positive. All the returns are around 5% or more, except Corn. We can see a significant upward trend of Soybean Meal and soy derivatives in general. Here we see Soybean, which is also rising strongly, and this is Soybean Oil, which did slightly worse than the other two.

Let's take a look at the currencies. In particular, I want to check out the level of the Euro-Dollar. Its value is still 1.1341. And as you can see from the chart, it's been almost flat over the last three weeks.

Finally, let's check out what Bitcoin did. In this case, too, we see that there are no relevant movements. It gained 1.5%, which is really nothing for a market such as Bitcoin. We can say that it's still in a congestion zone. So let's wait and see if it will break through these levels and start a downward or an upward trend, although, at the moment, it doesn't seem to actually have much bullish strength.

Let's move on to the rollover calendar now. Next week we'll have to roll over the Platinum, Soybean and its derivatives (Soybean Oil and Soybean Meal), Heating Oil and Gasoline. On December 29, we'll have to roll over Bitcoin

And with that, our weekly overview of the markets is over. I remind you that if you download the Unger Academy mobile app, you can receive real-time notifications on the rollovers.

For those of you who want to understand more about our approach to the markets and the method we teach at the Unger Academy - the method of Andrea Unger, the only 4-time world trading champion with real money - we're going to leave you a link in the description of this video. It'll take you to a video in which Andrea condensed a lot of what he's learned in 20 years of his career as a trader and explains the foundations of his method.

Alright, with that I will see you in two weeks. As I told you before, many exchanges will be closed next week, which means that the volumes will be very low.

Merry Christmas to you and your families!

Until we'll see you again, please be safe! 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.