Will the Markets Go on Vacation This Week?

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Will the Markets Go on Vacation This Week? PART 1 OF 8

Is Volatility Headed for Another Rebound?

Dow stole the show last week

Volatility trended lower during the week ended August 4, 2017, as global markets remained close to recent highs. The uptick in the US employment numbers was the key economic data in the previous week, and impressive earnings added to the market’s optimism. Apple (AAPL) stole the show by beating market expectations, which helped the indexes remain close to their peaks.

The Dow Jones Industrial average (DOD) gained 1.2% in the previous week, closing above the 22,000 mark for the first time. The other two indexes were largely unchanged, with the S&P 500 (SPY) gaining 0.19% and the NASDAQ (QQQ) losing 0.36% in the previous week.

Is Volatility Headed for Another Rebound?

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Other segments of the financial markets, bonds, and currencies had a minor pullback, reacting to the better-than-expected US non-farm payrolls data. The bond markets (BND) appreciated marginally as Federal Reserve member speeches indicated a further slowdown in the pace of rate hikes. The US dollar (UUP) recovered some of its losses from the previous month on the back of solid payroll growth.

VIX rebounds from all-time low

The VIX Index (VXX), the widely acknowledged fear gauge of Wall Street, continued its decline after a minor pullback in the week ended July 28. The VIX Index (UVXY) recorded a lifetime low of 8.84 during the week, but it has rallied back to close at 10.03 in the previous week.

According to the latest Commitment of Traders (or COT) report released by the Chicago Commodity Futures Commission (or CFTC), large speculators and traders have increased their overall net short positions to 158,114 contracts from 136,641 contracts in the previous week.

Series overview

In the remaining parts of this series, we’ll analyze how different asset classes performed in the previous week and discuss the outlook for these asset classes.


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