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Market Update

This week starts with Jackson Hole behind us, Hurricane Harvey still playing out, and NFPs/debt ceiling concerns looming on the horizon. S&P500 ATM volatility (and put skew) has come back down to earth in spite of realized vol creeping higher while the dollar index is at the lowest level it’s seen since Jan 2016.

Energy

As of Sunday evening, according to the WSJ Hurricane Harvey has taken out ~15% of the US’ oil refining capacity as it continues its destruction and energy markets prepare for a bumpy week. WTI futures are pivoting around the new year although gasoline (RBOB) futures could end up being the more interesting story having caught a pure bid with front contracts up 5.8%:
WTI
RBOB

Gold

Thus far in 2017 gold has been unable to break $1,300 although not for lack of trying. With spot prices threatening the high-water mark again the COT report shows that managed money (AKA speculators) have reduced their short positions to the lowest absolute level since mid-Dec 2012:
Gold
Dec 2012 started a ~40% decline in gold prices so YMMV.
Longer dated constant maturity vols are near recent lows, while 7-day CM vol is hovering around average on a 1-year timeline so it appears that the market isn’t setup for any long-term surprises (with the exception of the occasional volume spike like the one on Friday ahead of Yellen’s speech):
Gold Vol Cone
Gold Volume Spike