The Sharp End Of The Stick

OK, now we’re getting to the sharp end of the stick. Yesterday had all the hallmarks of a potential “turnaround day”, but perhaps fell a bit short. With the ECB/BOE/BOC today and US non-farms tomorrow, there is no kind of price action that should surprise (except, perhaps, a low-volume, summery flat-lining.)

The currency market has been rumbling for a couple of weeks now. Perhaps it’s been the drumbeat of sturm und drang over the fate of the dollar (the latest example of which is here)…but it’s interesting to observe that demand for FX options (and thus, implied vols) have been rising for the last week or two. This is the first sign of an uptick in FX implieds this year, and contrasts sharply with the ongoing decline in VIX (^VIX).

A sign of a big move comin’ perhaps?

Meanwhile, in equities, major indices fell yesterday, but not enough to provide more than the faintest crumb of comfort to bears. Specifically, both the S&P 500 (^GSPC)….

..and Eurostoxx…

…were supported by the recently-breached 200 day moving averages. It’s interesting to observe that number of other asset prices never looked back once breaching their 200 day MAs over the last few weeks. (Naturally, one of the few that Macro Man tried to play, copper, was an exception.)

Regardless, it looks like the 200d MAs represent a useful trading pivot for indices over what’s likely to be an eventful 30 hours of trading.

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