Financial market analysis prices and volatility

Find weekly our studies and decryptions on the evolution of prices and volatility of bond markets, foreign exchange and equity indices.

Update : 11/21/2022 - 05:45 am GMT
Memento
US US Bond Market
A U.S. bond market with a disparate evolution of yields. Over a week, the US curve has accentuated its inversion with a greater increase in the yields of the short part (bonus for the 2-year) compared to those in the middle and the decline in yields at the end of the curve. After the expected recovery of the IV (Move Index), this shortened week will again favor the hunt for theta making the IV drop from Wednesday afternoon (a new exaggeration could be an opportunity to become temporarily long vega). The short-term volatility (HV) is stagnant, stabilizing long-term volatility at a historically high level. Concerning spreads, with the exception of the 10 vs 5-year, all spreads remain fundamentally bearish.
EUEuropean bond market
A European bond market that is more volatile than that of the United States, with falling yields (excluding the 3-month). Over a week, the FR, ITA curves flattened with a faster decline in long yields and the 2-year for the FR. The GER curve inverted with the faster decline in long yields. The repayment of LTRO aimed at draining liquidity from the market is surely the cause of the increase in the yield of 3-month maturities (speed bonus for the ITA), quite strange for funds intended for the economy (sic) ! The rise in 3-month yields caused 10 vs 3-month spreads to plunge, signaling a tightening of lending to the economy and the 10 vs 2 year GER spread confirmed its entry into the negative zone indicating an economy heading towards recession. The slight decrease in general short-term volatility (HV) has allowed long-term volatility to stabilize at levels slightly higher than 2012. We note the acceleration of volatility of the 2-year FR. The 10-year spreads against Germany continued to ease with a speed premium for the ITA and FR. Noteworthy the 10-year ITA which fell vs. the SPA.
EURUSDEURUSD parity

The monetary tightening of the SNB in September and its recent liquidity draining action did not continue to benefit the Swiss franc, stabilizing it against the euro and the dollar which remains in a phase of consolidation. For the euro, it remained firm against the major pairs except for a small weakness against the pound and the EURUSD pair, which has benefited from a potential narrowing of the interest rate gap, should inhibit its upward movement with the limited recovery of the dollar.

WorldEquity Indices

Stock markets that are holding steady with volatility (HV) at historic levels that is no longer increasing, except for the HSI. The performance of the stock market indices raises a question : who is mistaken ? Is it the bond market that anticipates further liquidity withdrawals and a sharp economic slowdown or the stock indexes that ignore the concerns of the bond market? Maybe they are blinded by the futures contracts (US) pointing to lower rates in 2024 ?

USUS 10 year government at 3.829

Taux 10 ans USA

Pression Acheteur Pression Vendeur

fundamental trend : Consolidation

The buying pressure declines by slowing its speed, the prevailing selling pressure by slowing its speed.

For this week, the U.S. 10-year should break its resistance level 3.856 / 3.874 to find a ceiling below 3.899 / 3.924. Its bearish movements should be limited to its support level 3.650 / 3.621.

Resistances 3.830 3.840 3.856 3.874 3.887 3.899 3.924 3.930 3.948 3.961 3.983 3.990 4.010 4.022 4.036 4.049 4.054 4.079 4.089 4.100
Supports 3.800 3.791 3.782 3.765 3.750 3.740 3.723 3.699 3.671 3.667 3.650 3.621 3.590 3.570 3.560 3.550 3.526 3.512 3.470 3.433
Volatility HV * 21 D. 252 D. LTV
Average range * Day 0.115 Weekly 0.268
Max. weekly range * 3.561 4.097

* Anticipated

GermanGerman 10 year government at 2.017

German 10 year government

Buyer PressureSeller Pressure

fundamental trend : Consolidation

The buying pressure declines by slowing down its speed, the predominant selling pressure stagnates.

For this week, the German 10-year should break its resistance level 2.087 / 2.093 to find a ceiling below 2.202 / 2.219. Its bearish movements should be limited to its support level 1.855 / 1.844.

Resistances 2.030 2.049 2.074 2.087 2.093 2.108 2.153 2.161 2.174 2.185 2.202 2.219 2.265 2.284 2.296 2.317 2.324 2.355 2.372 2.401
Supports 2.016 1.996 1.981 1.971 1.967 1.956 1.930 1.921 1.907 1.898 1.862 1.855 1.844 1.824 1.813 1.793 1.770 1.758 1.734 1.726
Volatility HV * 21 D. 252 D. LTV
Average range * Day 0.115 Weekly 0.260
Max. weekly range * 1.757 2.277

* Anticipated

FrenchFrench 10 year government at 2.488

French 10 year government

Buyer PressureSeller Pressure

fundamental trend : Consolidation

The buying pressure decreases at a steady rate, the predominant selling pressure decreases at a reduced rate.

For this week, the French 10-year should test its resistance level 2.554 / 2.564 to find a ceiling under 2.701 / 2.736. Its bearish movements should be limited to its support level 2.316 / 2.307.

Resistances 2.492 2.501 2.527 2.553 2.564 2.579 2.614 2.645 2.653 2.664 2.696 2.711 2.736 2.753 2.763 2.773 2.787 2.799 2.809 2.832
Supports 2.457 2.446 2.436 2.427 2.414 2.394 2.385 2.379 2.353 2.333 2.316 2.307 2.278 2.253 2.242 2.228 2.210 2.204 2.169 2.155
Volatility HV * 21 D. 252 D. LTV
Average range * Day 0.124 Weekly 0.262
Max. weekly range * 2.226 2.750

* Anticipated

EuropeEURUSD at 1.0318

Euro vs Dollar

Buyer PressureSeller Pressure

fundamental trend : Bearish

The predominant buying pressure decreases by reducing its speed, the selling pressure decreases at a steady rate.

For this week, the single currency should test its support level 1.0241 / 1.0237 to find a floor on the level 1.0180 / 1.0163. Its bullish movements should be limited to its resistance level 1.0442 / 1.0465.

Resistances 1.0341 1.0350 1.0380 1.0390 1.0404 1.0414 1.0424 1.0442 1.0465 1.0481 1.0486 1.0496
Supports 1.0300 1.0290 1.0281 1.0273 1.0264 1.0254 1.0241 1.0214 1.0180 1.0163 1.0148
Volatility HV * 21 D. 252 D. LTV
Average range * Day 0.0116 Weekly 0.0222
Max. weekly range * 1.0096 1.0540
* Anticipated

USSP500 at 3965

SP500 Index

Buyer PressureSeller Pressure

fundamental trend : Bearish

The predominant buying pressure and selling pressure are stagnant.

For this week, the index should test its 3904 / 3894 support level to find a floor on its 3861 / 3853 level. Its bullish movements should be limited to its resistance level 4027 / 4049.

Resistances 3976 3983 3996 4010 4016 4027 4049 4058 4076 4086 4096 4105
Supports 3958 3950 3939 3929 3916 3907 3894 3886 3870 3861 3853
Volatility HV * 21 D. 252 D. LTV
Average range * Day 53 Pts Weekly 153 Pts
Max. weekly range * 3812 4118
* Anticipated
IMPLIED VOLATILITY SP500 OPTIONS

Variation of volatility centered on 1 week

SPX 12/16/2022 01/20/2023 SP P/C
IV 21.65 ( - 2.97 %) 21.63 ( - 2.83 %)
CALL 21.42 ( - 3.70 %) 22.03 ( - 3.14 %)
PUT 21.88 ( - 2.24 %) 21.32 ( - 2.05 %)
SP P/C + 0.46 ( + 0.32 pts) - 0.71 ( + 0.27 pts)
SPY 12/16/2022 01/20/2023 SP P/C
IV 23.04 ( - 0.86 %) 21.92 ( - 2.10 %)
CALL 22.07 ( - 3.82 %) 21.25 ( - 4.29 %)
PUT 24.01 ( + 0.48 %) 22.60 ( + 0.04 %)
SP P/C + 1.94 ( + 1.35 pts) + 1.35 ( + 0.96 pts)

After Wednesday’s eco. numbers, the shortened week should attract the theta sellers and strain the volatility IV. Selling a strangle SPX 4325 / 3490 on January could be tempting.
The buying small put outside only harms the seller.

VIX INDEX at 23.12
  • Pressure
  • VIX - HV
VIX HV SP500 / HV UST - Weekly
VIX HV SP500 / HV UST - Daily