Over the weekend we pointed out this would be a crucial week for markets. This week’s volatility hasn’t really cleared anything up although there are some notable observations to be made after yesterday’s trading session:
- Equities found support at an area of previous resistance and a key Fibonacci level
- Yesterday’s large rally in interest rates is a good indication that rates may have put in a short/medium term bottom
- Yesterday’s 94% upside volume day was the first 90% upside volume day of 2014
- A very unusual combination of gold miners +5.15% while gold was down roughly .5% on the session – the GDX/GLD ratio is working on putting in a double-bottom which would be a bullish omen for both gold and the miners
- Crude oil staged its first 10% rally since it began its free-fall in September – a weekly close above $60 would be a good indication that crude has put in a short/medium term bottom
- Seasonality is now hugely favorable for equities until after New Year’s
Returns by Trading Day Since 1928
- After pulling back slightly in recent days the US Dollar Index surged higher yesterday and appears poised to make fresh multi-year highs before year-end
- The CBOE Crude Oil Volatility Index (OVX), which is essentially the VIX for oil, remains at an extremely elevated level despite the modest stabilization that we have seen in oil during the past couple of days
The main takeaway from this chart is that the majority of options market participants do not believe the lows are in for this decline in oil (also note that this is the market’s expectation for 30-day implied volatility of crude oil prices using United States Oil Fund (NYSE:USO) options)