Commodities Recap For The Week Of Oct. 12, 2018 – ProShares VIX Short-Term Futures ETF (NYSEARCA:VIXY)

Commodities Recap For The Week Of Oct. 12, 2018 - ProShares VIX Short-Term Futures ETF (NYSEARCA:VIXY)

The Story of This Week: Volatility Returns to the Inventory Market – I am Taking Income on VXY

It was an unsightly week within the inventory market. October has an extended historical past as a month the place shares come underneath promoting strain, and the indicators have been on the wall. The ongoing commerce dispute between the U.S. and China continued to escalate over current weeks. The Worldwide Financial Fund warned that protectionism was resulting in “dark clouds” over the worldwide financial system. Rates of interest in the USA have been rising. At their September assembly, the Fed hiked the Fed Funds fee by 25 foundation factors and financial knowledge factors to the central financial institution following by means of on their pledge for an additional one-quarter of a one-% price hike at their December assembly.

Furthermore, this system of permitting the legacy of quantitative easing to roll off the Fed’s stability sheet continues to place upward strain on rates of interest additional out alongside the yield curve. As charges on medium and longer-time period maturities rose, the U.S. bond market hit the skids in September. This month the 30-year Treasury bond fell to its lowest degree since 2014 at 136-14. The inventory market ignored larger charges and “dark clouds” over commerce for a time, however this previous week the chickens got here residence to roost. The DJIA fell by over 800 factors on Wednesday and one other 545 factors on Thursday. On Friday the index rose by slightly below 290 factors. Different indexes within the U.S. and all over the world adopted as an extended-overdue correction has descended on fairness costs. Nobody ought to have been caught unexpectedly by the promoting in shares. My query was, what took so lengthy?

Those that learn my articles on In search of Alpha know that I had been advocating shopping for volatility associated inventory market ETF merchandise on dips over current weeks. The VIX index dipped to its most up-to-date low of 11.34 on October three. This previous week, the VIX hit a excessive of 28.84 on Thursday. The volatility index on the S&P 500 index acts like a brief-time period put choice on shares throughout sudden and violent declines. My favourite product for brief-time period buying and selling is the ProShares VIX Brief-Time period Futures ETF product (VIXY).

Supply: Barchart

Because the chart exhibits, VIXY rallied from a low of $21.27 on October 1 to $31.74 on October 11. I didn’t purchase the low on this product, nor did I promote the excessive. VIXY moved up by over 49% over the ten-day interval, and I caught a big piece of the achieve by buying on dips on a scale-down foundation and promoting scale-up because the promoting frenzy hit the inventory market. I’m now on the sidelines within the volatility index. VIXY acts like a brief-time period put choice on the shares market. The fund abstract for the ETF states:

The funding seeks outcomes (earlier than charges and bills) that, each for a single day and over time, match the efficiency of the S&P 500 VIX Brief-Time period Futures Index for a single day. The index seeks to supply publicity to market volatility via publicly traded futures markets and is designed to measure the return from a rolling lengthy place within the first and second month VIX futures contracts.

The prime holdings embrace the primary two lively month VIX futures contracts:

Supply: Yahoo Finance

VIXY is just not applicable for lengthy-time period positions because the decay within the product may be brutal. Nevertheless, as a brief-time period buying and selling software, VIXY acts as a put choice on the inventory market and this week it paid off huge time for many who purchased the dip.

In relation to commodities, larger rates of interest is usually a paradox. If actual charges rise, it will increase the price of carrying lengthy positions and inventories which tends to weigh on uncooked materials costs. This week we noticed crude oil transfer decrease and copper and base metals exhibit worth weak spot in response to greater charges and the potential for a danger-off interval in markets throughout all asset courses. Nevertheless, the worth of gold took off to the upside on Thursday reaching its highest worth since early August at $1230 per ounce. Gold is the last word inflation barometer, and the yellow metallic might be signaling that the financial situation that eats away on the worth of cash is a transparent and current hazard after a decade of accommodative financial coverage.

In the meantime, the Fed has its eye on inflationary pressures because it hikes charges on a brief-time period foundation and continues on its path of decreasing its swollen stability sheet. President Trump has unleashed a Twitter storm on the central financial institution saying they’re too tight and have gone “crazy” and is “out of control.” Commerce points, a big inventory market correction, a standoff between the President and his appointee on the Fed, and a world that’s all the time offering surprises is a potent cocktail for worth volatility in markets throughout all asset courses. On Friday, shares recovered to finish a wild week. Buying and selling somewhat than investing is more likely to produce optimum leads to the present surroundings.

Highlights in Commodities:

  • Gold posts a 1.36% achieve on the week as worry and uncertainty grip markets
  • Silver strikes zero.10% simply decrease because the final report
  • Platinum posts a 1.88% achieve for the week and was buying and selling at a $382 per ounce low cost to gold
  • Palladium strikes zero.35% greater on the week and closes on the $1060 per ounce on Friday
  • Copper positive factors 1.36% the week
  • Iron ore moved 2.16% greater on the week
  • The BDI strikes 2.51% decrease because the final report
  • Rotterdam coal falls eight.62% on the week in sympathy with the correction in crude oil
  • Lumber falls eight.62% on the week and closes on the $320 degree on the November futures contract
  • November NYMEX crude oil corrects four.04% decrease
  • December Brent crude oil strikes four.34% decrease however Iran stays within the background
  • The premium for Brent over WTI in December closes the week on the $9.10 down 74 cents on the week
  • Gasoline falls 6.91%, and heating oil strikes 2.97% decrease since final week on the November futures contracts
  • The gasoline crack unfold plunges 22.58% whereas the heating oil crack strikes zero.81% larger on November futures as merchandise mirror seasonal influences
  • Pure fuel makes a brand new contract excessive at $three.368 and positive aspects zero.57% on the November futures contract on the week. The EIA reported an injection of 90 bcf into storage on Thursday for the week ending on October 5
  • Ethanol strikes zero.98% decrease on the week
  • November soybeans transfer zero.17% decrease on the week in submit-WASDE buying and selling
  • December corn rises 1.49% on the week after the USDA report
  • CBOT wheat posts a zero.72% loss on the week. December KCBT wheat buying and selling at a 7.00 cents premium over CBOT wheat up three.75 cents from final week
  • March sugar futures up one other three.48% on the week
  • December espresso rises 6.98% since final week’s report and closed at over $1.1650 per pound
  • Cocoa strikes 6.72% larger on the week
  • Cotton rebounds 2.98% on the week after WADSE
  • FCOJ futures gained zero.66% on the week
  • Stay cattle fall 1.67% since final week on December futures
  • November feeder cattle down 2.28% because the earlier report
  • December lean hog futures transfer four.43% decrease on the week
  • The December greenback index futures contract strikes zero.41% decrease as rates of interest rise
  • December Lengthy-Bond futures buying and selling at round 138-12 up 1-06 for the week because the implosion in bonds threatens fairness markets
  • The Dow Jones Industrial Common closes at 25,340 on Friday, October 12 down 1,107 factors on the week as shares plunge through the week. The VIX strikes 6.28 greater and was buying and selling at 21.31 on Friday
  • Bitcoin closes at $6,280.42 Friday down $272.21 or four.15% since final week
  • Ethereum moved decrease to $197.35 down 11.39% because the final report

Worth Modifications for the Week:

GSG closes the week at $17.83 per share, down 48 cents since final week’s report on weak spot in crude oil.

Supply: Barchart

GSG is the iShares S&P GSCI Commodity-Listed Belief which represents a diversified basket of commodities futures contracts, has internet belongings of $1.42 billion and trades a mean day by day quantity of 334,596 shares.

Disclaimer: Any funding includes substantial dangers, together with, however not restricted to, pricing volatility, insufficient liquidity, and the potential full lack of principal. This doc doesn’t in any means represent a suggestion or solicitation of a suggestion to purchase or promote any funding, safety, or commodity mentioned herein, or any safety in any jurisdiction through which such a suggestion can be illegal underneath the securities legal guidelines of such jurisdiction.

The Hecht Commodity Report is a should-learn…

The Hecht Commodity Report is among the most complete commodities reviews obtainable right now from the #2 ranked writer in each commodities and valuable metals. My weekly report covers the market actions of 20 totally different commodities and supplies bullish, bearish and impartial calls; directional buying and selling suggestions, and actionable concepts for merchants. Greater than 120 subscribers are deriving actual worth from the Hecht Commodity Report.

Disclosure: I/we now have no positions in any shares talked about, and no plans to provoke any positions inside the subsequent 72 hours.

I wrote this text myself, and it expresses my very own opinions. I’m not receiving compensation for it (aside from from Looking for Alpha). I’ve no enterprise relationship with any firm whose inventory is talked about on this article.

Further disclosure: The writer all the time has positions in commodities markets in futures, choices, ETF/ETN merchandise, and commodity equities. These lengthy and brief positions have a tendency to vary on an intraday foundation.

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