Last week we began to see correlations tighten between the three major benchmarks, stocks, bonds and currencies. Silver led the commodities rising 2.66% followed by Gold 1.75%. Soy -5.18% and Corn -2.28% led the grains lower, providing shorting opportunities. The Euro led the currency markets trading higher 1.23%. Will correlations continue to tighten, providing as a leading indicator to the direction of the markets?
Crude Oil will be on the spotlight in the week ahead. As CNBC noted, there is large interest in a bearish crude price atMonday’s close:
“Meanwhile, at a price of roughly $7.50, the 16,000 contracts outstanding on the 50-strike puts alone are worth $120 million. Throw in the interest in the 85-strike put ($273 million), the 60-put ($133 million) and the 55-put ($129 million), and we’re beginning to talk about a billion-dollar event in the crude oil market.”
Top U.S. hedge funds made bullish bets on the energy sector in the second quarter even as companies’ shares began a slide toward multi-year lows on concerns about oversupply, regulatory filings showed on Friday. The moves were revealed in quarterly disclosures of manager stock holdings, known as 13F filings, with the U.S. Securities and Exchange Commission. They are of great interest to investors trying to find a pattern in what savvy traders are selling and buying. Large oil speculators in the futures market are still bullish but the last two weeks have seen a reduction as the crude oil futures has moved lower to retest the March lows. The market sentiment is becoming progressively more bearish as analysts keep lowering target levels. The speculative positioning should trigger volatility in the weekahead. Is this the beginning of some profit taking or short covering rally? Or will oil prices continue to sell-off?
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Joe Rios – Founder, Rios Quantitative LLC
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