Interest Rate Whack


VIX Futures Premium

On Friday the premium ended in the green bull zone at 14.28%, with the new April front-month futures contract, vs. 13.84% at weekend March 12 also in the green.


Since most of the volume and open interest are in the two closest futures contracts measuring the volume-weighted premium relative to the standard 30-day VIX provides a good real-time sentiment indicator based upon actual commitments of large Asset Managers and Leveraged Funds.

Market Breadth as measured by our preferred gauge, the NYSE ratio adjusted Summation Index that considers the number of issues traded, and reported by McClellan Financial Publications, looked encouraging to the bulls advancing for six days until Thursday when it turned lower again, after the interest rate jolt, but still managed to eke out a small gain of 36.82 points or +5.82% for the week.


Booked Positions Review

Energy Select Sector SPDR Fund (XLE) 49.53 dropped 4.04 points or -7.54% last week following crude oil lower. This suggestion first appeared on February 22 in Digest Issue 8 "Crude Oil Uptrend [Charts]." 

As of Tuesday, March 16 and before Thursday's 7% decline, the CFTC Disaggregated Commitments of Traders - Options and Futures Combined, COT report, shows open interest continued increasing as prices advanced, while all the reporting groups, not just those referred to a "speculators" had been reducing short positions while adding longs. It was as if everybody was on the same side of the boat causing it to lean making it vulnerable to a sudden unexpected wave. Apparently, dismal Covid news from Germany and India set off a selling frenzy as traders rushed to right the ship. The next report, this Tuesday will reveal the changes. For the week WTI Crude Oil declined 4.20 points or -6.40% basis of May futures ending at 61.44 per barrel. Last Thursday's decline slightly exceeded the upward sloping trendline, USTL from the November 2 low at 36, intraday day, but then closed back above it, as did Friday's 1.38 point advance. Concluding a trend change last week seems premature until it closes solidly below this trendline.

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Disclaimer: is not a registered investment adviser and does not offer personalized advice specific to the needs and risk profiles of its readers.Nothing contained in this letter ...

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