While the VIX is back near its 2015 low, closing at 13.40 yesterday, volatility in global financial markets as a whole has been much higher over the past few months. Currencies and commodities have been the real movers, with all macro eyes on the U.S. dollar and oil.
With that in mind, I wanted to run through the major macro markets to put the recent volatility in context.
First, the U.S. dollar has had its largest correction in the past week after an incredible bull run over the past 9 months:
The 50 day ma is now around $25.15, and has not been touched since the bull run started in the summer. That level corresponds to around the 1.1150-1.1250 area in the EUR/USD exchange rate, and is a crucial technical spot for the U.S. dollar in the coming weeks.
Despite the calls for a possible turn in crude oil, its bounce in the past week (as the U.S. dollar fell) has been one of the weakest among all of the commodities. Even if we look at a 1 year contract of WTI crude oil (with the USL etf, as opposed to the widely followed USO etf, to minimize the negative impact from a steep contango), oil has not even reached its 50 day ma on the most recent advance:
Given the sharp pullback in the U.S. dollar, the oil chart still looks quite sick.
Gold looks a little better, comfortably back above its fall lows:
While silver looks much better, advancing aggressively over the past week, now back above its 50 day ma:
Gold and silver also held up much better over the past 6 months compared to most commodities, even as the U.S. dollar steadily rose. Industrial metals like copper have also bounced much better in the past week than energy and grains.
As for Treasuries, it seems like nothing can keep them down. TLT is back above its 50 day ma after last week’s FOMC, and within 5% of its January high:
However, it’s worth noting that the 50 day ma is flattening out for the first time since the start of 2014, a possible sign of a weakening of the long-term uptrend.
Finally, the S&P 500 is back to testing its all-time highs. We’ve gotten used to record after record for the U.S. indices:
I am amazed at the very persistent nature of this trend. The 200 day ma could be drawn with a ruler, rising in almost a straight line over the past 2 years, with very few bumps in the road.
That steady, uninterrupted uptrend is a big reason why VIX is back in the low teens despite the macro volatility across other asset classes:
Even options traders have little interest in buying premium on such a steadily rising chart.
While correlations between markets seems to have picked up, with the U.S. dollar the ox driving the cart, stocks seem to be the one asset class singing its own tune throughout the volatility. That makes it harder to pin down its macro drivers. Meanwhile, most other global assets are being driven by the U.S. dollar, for better or for worse.