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What Could Move Markets this First Week of Q4

PART:
1 2 3 4 5 6 7 8
What Could Move Markets this First Week of Q4 PART 1 OF 8

Will Volatility Fall this Week?

Volatility continues to trend lower

Stock market volatility around the globe continued to trend lower as uncertainty about German elections, North Korea, and US tax reforms subsided. Chancellor Angela Merkel managed to keep her position for a fourth term but with support from a coalition government, there was no new aggression from North Korea despite new sanctions from the UN, and US tax reforms saw some light.

Financial markets around the world made impressive gains in September, breaking the usual seasonality of September being the second-worst-performing month of the year. We’ll have to see how this positive momentum continues into the fourth quarter, which has been the best-performing quarter in many recent years.

Will Volatility Fall this Week?

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US market performance

The S&P 500 index (SPY) managed to record another life-time high, closing at 2,519.36 for the week ending September 29, posting a weekly gain of 0.68%. Similar gains were recorded on the NASDAQ (QQQ) and the Dow Jones Industrial Average Index (DOD), with gains of 1.97% and 0.49%, respectively.

The US bond markets (BND) continued to fall as the Fed’s plan to raise rates in December kept defining the bond market direction, and the US dollar (UUP) gained against majors for the same reason.

VIX index speculators continue to bet against volatility

The volatility index, VIX (VXX), continued its journey lower as market volatility fell this week. The index closed at 9.51, falling 0.83% last week. As per the latest “Commitment of Traders” report released by the Commodity Futures Trading Commission (or CFTC), large speculators have increased their overall net short positions to 172,395 contracts from 171,187 contracts through Tuesday, September 26. Traders are betting that there could be further declines in the VIX index.

In the rest of this series, we’ll analyze how different asset classes performed last week and discuss the major movers for these asset classes this week.

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