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November 14 Equities Commentary: Todd Colvin

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- Todd Colvin: US equity markets continue to see more volatile trading sessions. This morning was no exception. We saw a rally, we got some decent, positive inflation news out of the CPI. It looked like things were going to be a positive equities day for the E-minis. We opened, we rallied about 20 handles. Lo and behold, later in the afternoon, we see a major sell-off. We saw really about a 30, 40-handle sell-off in the E-minis really just as things were picking up. Obviously, it's a lot of headlines, it's a lot of tape bombs, it's a lot of what-ifs, and even a little bit of fear, something the market hasn't tasted in a long time. You go back several years, you just see those E-minis creeping up higher and higher every day. Since those all-time highs were put in about a month ago, things have really changed. And we've seen since the US elections, with upcoming issues, whether it be with Europe, whether it be with Fed policy, whether it be with whatever, we've seen the market kind of dancing around with wider intraday swings both ways, higher and lower, not typical of what we've seen with this slow and steady grind higher and very low volatility. And speaking of volatility, the VIX index up again. So after the VIX index experienced a pretty big spike, at least as far as what we've seen in spikes from the VIX recently, it pulled way back and now we're starting to elevate it again, getting back to that 20 level, a significant level we haven't spent a whole lot of time above over the last several years, notwithstanding the second half of 2018. So right now, volatility becoming an issue because there is fear in the market. It's not necessarily fear of a collapse in the stock market, but really how all these markets are intertwined, how it's going to affect, whether you're looking at declining bond yields, rising gold prices, declining oil prices, issues in credit, whether it's Europe, Italy, whether it's Brexit. There's a lot of risk out there, and things that we really haven't had to deal with given the zero interest rate bound by Fed policymakers here. You start to raise those interest rates, things start to get a little tight, and equities start to feel the pain. And that's what we're kind of seeing here. So we're seeing higher volatility, we're seeing wider intraday swings, we were able to hold above the 2700 level in E-minis, so we haven't seen a settlement below 2700 this month, at least not since October 30th, but certainly, that will be a level to watch. And we haven't spent a whole lot of days talking about down days in equities outside of the last 30 days, so right now this is very new. And again, it's bringing in more volatility. And lastly, what are we looking at ahead? Well, we've got Chairman Powell speaking tonight from Dallas. He will touch on policy, he will touch on the economy. And those are things that the market, I think, already has a pretty good view. So unless he says something out of left field, I think it holds the status quo. Likewise with retail sales coming out, we've got some New York Fed numbers, Philly Fed numbers, those should probably come in status quo. Lastly, what we're seeing now from the equity markets, something we haven't seen in a long time, and that's politicalness coming in. And we heard from Maxine Waters today, talking about rolling back bank regulations. That didn't do a whole lot of favors for bank stockholders. Likewise, if you look at the judiciary committee, Jerrold Nadler coming in, he's talking about perhaps impeaching the president. That's not good for equities, that's not good for anybody when you have talk like that, no matter what side of the political fence you sit on. And I think that that's going to increase volatility in the markets as we move forward. We're not going to see those new congresspeople taking their seats and their chair positions until after the first of the year, but they're talking about it. And it is going to affect volatility, it is going to affect the equity markets, and right now we're seeing that firsthand. So right now equity markets still trying to hold above 2700. We have some news and data, and don't forget Chairman Powell tonight.

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Duration: 3 minutes and 47 seconds
Country: Andorra
Language: English
License: Dotsub - Standard License
Genre: None
Views: 14
Posted by: cmegroup on Nov 14, 2018

November 14 Equities Commentary: Todd Colvin

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