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Market Wrap
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The Volatility Index (VIX) is rising again as we see investors and traders switch to being more defensive as inflation worries grow. US indices opened higher today but have all given up those gains. At the London close the Nasdaq, S&P500 and Dow Jones Industrial Average were down -2.02%, -1.35% & -1.15% respectively. It is the 3rd Friday of the month, and options expiry is generally a volatile time in the market. Now that is removed, the next leading indicator will be how the market opens next week, as I am presuming, we get a directional move now until the next FOMC meeting.
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The S&P500 had printed a double bottom with yesterday’s low, so we’re no waiting to see if the market has taken the liquidity, trapping short sellers, or whether this is bearish momentum continuing to the downside and gearing up for a much larger correction.
The US treasuries caught a bid today, which has resulted in the 2-year and benchmark 10-year yields dropping away from recent highs. The forex heatmap shows the major currencies less decisively positioned risk-on as they were this morning and now, they’re typically giving no signal. The yen has gone from being the weakest across the board to being one of the strongest currencies relative to the others.
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When viewing the USDJPY it is notable that the range is very compressed, so any sign of strength in the yen compared to the greenback is at a low bar. After this compression, I would expect a range expansion and then an impulsive move away from the range. For now, and because it is Friday, I have closed out all positions. Currently the intraday momentum is to the downside, but the weekly is very much in an uptrend. Whilst price action is above 127.00 I’ll hedge my bets we go higher again. The BoJ governor said again today that the bank will patiently continue with powerful monetary easing.
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Silver is resting at the weekly 200-period EMA and appears to be within the larger range. As the US dollar index closes towards its weekly low and below the $104 level, the precious metal has also closed higher for the week. We will see a swing high in the US dollar next week, and last week’s low will be a key resistance level. $103.395 could be the high for the coming week which if that proves to be true, would possibly open the return to the range between $98 – $100, from where the previous impulsive move launched.
