Let there be…vol?

Will there be calm, or more party time?  Source: Google images

Will there be calm, or more party time? Source: Google Images

So this is probably the last ‘serious’ week for financial markets of 2014.  Some thoughts:

  1. Is oil done?  The news seems more bent on $40/barrel oil, or at least $50, so another 10-15% down move from here.  I’m sure many recognise that the media is generally way late to the party, so perhaps today’s slight recovery to above $58 is putting in the near-term floor.  My momentum models don’t care about the debate, and are staying well-short.
  2. Which is right: VIX or S&P?  Last week’s rise in the VIX, from about $12 to about $19, was an outlier move – similar to what happened last October.  So are we due for an exciting, proper sell-off in the S&P?  Or is this morning’s resilience in the index (up about 1%), combined with VIX selling off (down about 3%), the more relevant fact?  On Friday I reloaded on my old favourite UVXY trade, so I’m clearly hoping the latter.
  3. I feel bad for being long grains.  My same momentum models have me long soybeans, which has been a pretty good trade so far.  However I can’t ignore the oversupply, which I hear from family in the Midwest.  Another example of how the biggest enemy to a systematic trading approach is probably manual intervention.

In sum: I’d like a quiet week.  My models would prefer a chaotic week – or at least a continuation of that lovely oil trend.  With the remaining economic news of 2014 released this week, combined with rolls/option expiry, I’m guessing there will still be plenty of action.

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