Anxieties regarding longer-term inflation have entered the spotlight. The Fed’s easy-money policies and government stimulus spending had juiced growth and momentum into an epic bull run over the last year. However, these equity factors now face substantial risks from bond market volatility.
An analysis on Micron Technology (MU) earnings shows that short, dated straddles were highly profitable up until Q4 2019, after which these trades started experiencing significant losses. This is due to the realized underlying stock return post-earnings falling short of the market expectations.
Volatility trading is the term used to describe trading the velocity of movement in price of an underlying instrument rather than the direction of price. For example, you could trade the value of an equity index, but volatility trading typically means trading the expected velocity of movement.
Quant Cycles (formerly called the Cycle Projection Oscillator) is a technical tool that uses proprietary statistical techniques and complex algorithms to filter multiple cycles from historical data, combines them to obtain cyclical information from price data and then gives a graphical representation of their productive behavior. Other proprietary frequency domain techniques then are employed to obtain the cycles embedded in the price.
Last week we had one of the better jobs reports in recent memory with 313,000 new jobs in February in the United States. More important was the reaction as traders overlooked the potential for rates to rise. It was likely a given already as Powell warned they would do so. Nevertheless, the long bond maintained the low and the relief for longer-term rates has sustained since Feb. 21.
It looks like the S&P 500 Index may be on or near its weekly lows, although above my projected range. I want to explore the trade idea of going long the S&P 500 here at 10:45 a.m. Central on Thursday. Reasons I contend this is on the price lows, including that price being supported at the daily 20-period simple moving average (SMA) and weekly camarilla pivots, as well as transient intraday signals.
European equity markets are set to open around half a percentage point higher on Monday, taking a lead from Asia where markets also got the week off to a strong start.
Last week was one of those weeks where I was completely dialed in and laid out the roadmap very close to the way it worked out. If only I could do that every week. Of course, it helped to have the aid of the time windows. As you know markets peaked in the 610-day window to the August 2015 bottom, which is the Dow bottom.
It's been quite a tumultuous week in the markets, as we all know, but something seems amiss.....on Thursday when the Bank of England's Mark Carney talked about raising rates faster than expected, the pound popped (as one would expect) but it did not take even a few hours for it to completely reverse trend as if nothing happened, and the USD was back to being strong again. The speed of reversal was quite strange!
The $VIX Index had its biggest ever one-day move on Monday – it rose 20.01 pts; (or115.6%) to close at 37.32.