Scott Burrill - Market Notes

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Scott's notes
Scott's Market Notes

Mind the Gap

Jan 5, 2020

Markets are modestly lower on heightened geopolitical risk; however, last week, even with the abrupt sell-off on Friday, the S&P 500 still closed within its weekly option implied move of 35 points.

For the coming week, risk is slightly elevated this week to + / - 44 points or 12% implied volatility and a range of 3279.16 to 3190.54.

The Weekly Trend remains up, and the current bias is down.

With Implied Correlation focusing us on individual securities, volatility of volatility (VVIX) below 100, and volatility futures and skew relatively unscathed, Markets are taking the escalation in the Middle East in stride. Of course, that will change if price breaks down below the lower bound in the expected move leading to a multiple sigma move, with implied correlation flipping to a macro focus, and continued rally in Treasuries and a volatility curve inversion.  

Apart from the geopolitical events, it's an active week for Economic Releases, Fedspeak and Conferences.

Updated Levels.

All the best,

Scott

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