Market Analysis by covering: CBOE Volatility Index, S&P 500 TR. Read 's Market Analysis on Investing.com
The S&P 500 managed to rise a bit on Friday, which was also OPEX. However, once the index failed to move above the 20-day moving average, that marked the sixth straight day it failed to close above that level — and the fourth time it traded above it intraday but couldn’t hold the gains.
Perhaps that’s the hand of systematic sellers, but whatever the case, the index has been unable to clear the 20-day moving average, which for now appears to be an important resistance level. The index has been consolidating sideways over the past week, likely due to the pinning effects from OPEX. Now that OPEX has passed, it’s possible the trading range could begin to expand. The spread between dispersion and correlations remains historically wide, but as we move further into earnings season, that spread should begin to narrow. This would imply falling dispersion and rising correlations — a combination that typically points to lower stock prices. That’s because the VIXEQ is currently nearly double the VIX. As companies report earnings, their individual implied volatility will decline, while index-level volatility should rise — or at least fall less. This will cause the ratio to contract, and historically, when that ratio falls, stocks tend to follow lower. We’re also seeing the classic rotation away from out-of-the-money tail-risk hedging toward more immediate at-the-money protection, as reflected by the sharp collapse in the SKEW/VIX ratio. This week will also include two Treasury settlement dates, on October 21 and 23, which means liquidity will likely tighten again. As a result, usage of the Standing Repo Facility could pick up on both Tuesday and Thursday. For now, rates and the dollar have been cast to the side — that could change toward the end of the week when the CPI report is released, but until Friday, that’s not the market’s main concern.Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks. Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes.and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website. It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
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