Commodities of all stripes have come under selling pressure in recent months over concerns about the health of the global economy. The declines have been made more pronounced with the aid of a strong U.S. currency, in a flight to safety trade that has powered the trade-weighted U.S. Dollar Index up nearly 6 percent in the third quarter. Most visible of these are crude oil, which has slipped to a two-year low, and gold, which is flirting with its June lows. Read more about No Stock Blight Amid a Bumper Harvest 09-11-13
The conflict in Ukraine has entered a new, more dangerous phase. Russian armored troops crossed the border, opening a new front in the conflict in the process. NATO officials report that approximately 1,000 Russian soldiers have entered Ukraine. Pro-Russian rebels who had been losing ground, have now made gains with newly acquired advanced weapons systems that could only have been supplied by Moscow. This follows failed top-level peace talks between Ukraine and Russia. Read more about Investors Stay Cool as Eastern Europe Heats Up 08-28-14
Yesterday the U.S. Federal Reserve released the minutes from its Federal Open Market Committee’s July meeting. Upon reading those notes, analysts detected a more hawkish tone coming from the central bankers. The key takeaway was that Fed officials “noted that if convergence toward the committee’s objectives occurred more quickly than expected, it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated.” Read more about Goin’ to Jackson 08-21-14
Though they’re taking a breather today, blue chip stocks have recouped much of their recent losses and the major averages are once more close to record levels.
But despite the market’s bullish tone, on the surface at least, some participants in the options market are girding themselves for an outsized decline in share prices in the coming weeks. In fact, they are buying portfolio protection at a pace seldom seen in the last several decades. This issue we look at what the Chicago Board Options Exchange’s SKEW Index tells us about where the market may be headed.
Read more about A SKEWed View of the Market