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Market Volatility Bulletin: Trade Scares Roil Markets, Despite Powell's Attempt To Calm Them

The Balance of Trade profile picture
The Balance of Trade


  • Markets dive as Bears know how to launch full-scale assaults (down 3 days in a row now).
  • Powell does not appear to blame for this last round.
  • Term structure heads back into mild backwardation, futures increasing in their flexibility as it concerns upward movement.

Market Intro

CNBC: Thursday Close

Well, the good news is that stocks (SPY, DIA, QQQ, IWM) did not seem overly concerned about Mr. Powell’s follow-up appearance on Thursday.

After delivering prepared remarks, said: "We don't see any strong evidence yet of a decisive move up in wages. We see wages, by a couple measures, trending up a little bit, but most of them continuing to grow at about two and a half percent. Nothing in that suggests to me that wage inflation is at a point of acceleration."

The Dow, S&P 500 and Nasdaq all hit session highs on the back of that comment before retreating. Earlier this week, he testified before the House Financial Services Committee, where he indicated market volatility won't stop the central bank from raising rates. - Fred Imbert, CNBC

Treasury yields (IEF, TLT, AGG) fell, as traders and investors preferred to park assets in a less volatile instrument:

At the peak of the Congressional Testimony on Tuesday, the TNX had reached 2.95; it is down fully 15 basis points. Treasury volatility appears to be settling into a range.

Thoughts on Volatility

DJ makes an interesting point. I’m not sure the bull market is over. To my mind, there are several factors that could keep the bull alive, sustained earnings growth foremost among them (especially if it is revenue growth).

Where I am increasingly coming into agreement with DJ is that the low-vol, “easy bull” market very well could be putting in its death throws. The price action we’ve experienced in SPX has no place in the world of 2017. Even January 2018 had a couple pullbacks, but they were bought with both hands. Bearishness was simply not to be tolerated.

Now, however, volatility markets are taking a more flexible, two-sided approach to making projections about price action. Not

This article was written by

The Balance of Trade profile picture
Adam Zingg, CFA offers both practical and theoretical perspectives that will benefit readers who wish to learn more about how to execute  on views or strategies that interest them.  Whatever your overarching philosophy or expertise, I believe there is value in understanding how trading works. This is perhaps especially true for investors, who often take a more philosophical, less mechanical view when it comes to their processes. It is not my goal to:1) convince you which side of the market to be on2) establish your trading time frames3) have you directly follow any specific trade ideasInstead, I aim to demonstrate how complicated sounding ideas can be simplified and accessible.  My hope is to grow your tool kit of resources, and give you healthy confidence to execute your own personalized strategy.  Trading and investment are fascinating, applicable across a wide variety of fields and disciplines.  Greater focus on targeting, execution, and exit strategies build transferable life skills.  In reading my work, it is my goal that you will consistently glean useful insights and build skills that enhance your ability to trade and make important decisions.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I actively trade the futures and options markets, potentially taking multiple positions on any given day, both long and short. I also hold a more traditional portfolio of stocks and bonds that I do not "trade". I do believe the S&P 500 is priced for poor forward-looking returns over a long timeframe, and so my trading activity centers around a negative delta for hedging purposes.

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