Market Analysis by covering: S&P 500, S&P 500 Futures, CBOE Volatility Index, Cboe 1-Day Volatility Index. Read 's Market Analysis on Investing.com
can extend last week’s rally will be the big question, and it would seem the path forward may be more challenging. Now that volatility metrics have fallen back towards their recent lows, theitself — now sits around 11, placing it near the lower end of its historical range.
It is possible it opens closer to 8 on Monday, but at this stage, there is not much room for it to fall further. Given that limited downside, the volatility tailwind that has supported the market through the holiday week is unlikely to be as strong in the days ahead. With a substantial amount of economic data on the calendar, it is quite possible that the VIX 1-Day begins to move higher again as event risks return.thinning out and the spread between the bid and the ask widening considerably. This likely played a major role in the week’s trading action as well. It is therefore quite possible that, as conditions normalize this week, those pockets of thin liquidity will begin to fill in and the bid–ask spreads will narrow somewhat. These poor trading conditions in the S&P E-minis also pushed trading costs higher, making execution extremely expensive and well above levels seen over the past month. This again likely played a significant role in what we have been seeing in the market. When you combine that with volatility levels being reset, it suggests there simply wasn’t enough liquidity across the market to maintain a level, balanced trading environment. On top of that, Monday brings an $84 billion Treasury settlement, following the $52 billion settlement on Friday, 28 November. This has already pushed overnight funding rates sharply higher. The average repo rate on Friday was 4.09%, suggesting the SOFR rate on Monday morning will likely creep higher from its 4.05% level and result in even firmer overnight funding conditions. However, these pressures should begin to ease as we move through the week and the month-end effects fade. The Treasury also has two paydowns scheduled, which will add some liquidity back into the system — roughly $11 billion on the 2nd and about $7 billion on the 4th. So I would think that SOFR falls back towards the middle of the Fed’s targeted range by mid-week, and usage of the standing repo facility fades. Additionally, last week we saw BTIC adjusted S&P 500 Total Return futures for December 2026 decline to 76.5 after peaking around 86.5 in mid-September. If this divergence with the S&P 500 cash index continues, it will be worth noting, as we have seen this bearish divergence before. Additionally, the BTIC-adjusted S&P 500 Total Return for SOFR fell to 73 from around 85 at the same time. Typically, when the cost of equity financing declines, repo demand eventually drops, and equity prices follow suit. Also, equity repo is tied to daily Treasury volumes, and when Treasury repo activity rises, equity repo volumes fall, and vice versa. Below is a chart that shows the 10-day moving average of Treasury repo volume at DTCC. More importantly, Treasury repo activity increased towards the end of last week, and we will need to watch to see if it continues to rise. Anyway, lots to digest this week, and it will be exciting to find out if the pieces are falling into place. That’s for sure.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.
S&P 500 Futures CBOE Volatility Index Cboe 1-Day Volatility Index
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