Chasing blue waves, red waves, and other nonsense…..
Well, our Implied volatility signals wound up being correct – ahead of the election Tuesday, we saw MASSIVE implied Volatility PREMIUMS in the stock indices. For those that have been following for a while now, know that when you see IV Premiums, it’s a strong indicator that suggests investors/Wall Street was heavily hedged for the downside. If we know anything about markets, it that they tend to please the least amount of investors. We saw a strong move lower in stocks last week, only to see a massive reversal back higher with the ATHs back within reach. On the other side of that, the Bond market has been showing a massive short position being built in over the past month, typically another counter indicator (at least in the short-term), Bonds made one of their largest percentage moves EVER inside of a day on Tuesday night. Now what are we looking for moving forward? We’ll wait and watch to see if the IV Premiums sweat off (they already are), and turn into DISCOUNTS which is a classic complacency signal, usually coupled with an immediate overbought condition.
Nearly the entire complex is signaling immediate-term overbought. Grains, including Soybeans, Corn, Wheat are all trading at the top end of the range, and we expect buying opportunities will present themselves from better prices. Our Natural Gas position, unfortunately has been front running this OB condition in equities, we’ll address this later – but NG immediately oversold right now (again).
3 Key Markets to Watch
Big upgrades in the charts following yesterdays break-out.
Prices are also beginning to join in, following there immediate oversold levels last Friday.
Signaled immediate-overbought yesterday, but we’re looking for signs of a bottoming process here. Oil has been certainly the lagging commodity since we went bullish on Commodities back in June.
Pounded to the low end of our range, and now immediate oversold. You could easily see a correction in commodity assets in the next coming week or 2 just based off of the immediate-term oversold status of the Dollar. This is important to watch.
Originally Posted on November 6, 2020 – Futures Market Outlook Nov 6
Disclosure: RJO Futures
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.
Disclosure: Interactive Brokers
Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from RJO Futures and is being posted with permission from RJO Futures. The views expressed in this material are solely those of the author and/or RJO Futures and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.