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Market Analysis For Week of September 27, 2021 [Premium Articles]

Market analysis for week of September 27, 2021. The analysis focuses on major market indexes, ETFs, commodities and forex. Access to full article requires Premium Articles subscription or All in One subscription.

Report contents

  1. Weekly summary and recap.
  2. Analysis of major indexes.
  3. Popular ETFs.
  4. Asset ETFs
  5. Commodity ETFs.
  6. Factor ETFs
  7. Spot currency pairs.
  8. Markets to Watch.

1. Weekly summary and recap

  • U.S. stocks were higher on the week after an initial drop.
  • High beta large caps rebounded.
  • Low volatility large caps were slightly lower.
  • Bond prices were lower and yields rose.
  • Commodities rose to six-year highs.
  • Gold fell but crude oil rally continued.
  • The U.S. dollar index was higher on the week.

Recap (September 20, 2021 – September 24, 2021)

Large caps (S&P 500) ended the week with 0.5% gain.Tech stocks (NASDAQ-100)  were unchanged. Small caps (Russell 2000) added 0.5%. The Dow 30 rose 0.6%. High beta large caps rebounded while low volatility large caps fell slightly. The CRB was up 1.4% to six-year highs. Year-to-date crude oil is up 53.5% followed by CRB index with 34.3% gain. Gold has year-to-date losses of 7.6% followed by Treasure Bond Total Return at -1.8%.

2. Analysis of major indexes

VIX fell 14.7% to close at 17.75 after rising to 28.79 during the week.

Last week I wrote:

The odds are high for another spike in VIX towards 25 for next week.

The spike occurred but high implied volatility was short-lived. By the close of Tuesday the S&P 500 was down 1.8% from the previous week’s close but dip buyers emerged on Wednesday and the index gained 2.3% to the close of Friday for a net gain of 0.5% for the week.

During this month, realized volatility has been rising steadily, as shown in the chart below:

The annualized 21-day volatility rose from 7.4% on September 3, 2021, to 10.7% as of the close of Friday, September 24, 2021. The 14-day ATR relative to closing price rose from 0.64% to 1.02%. Although realized volatility rose, implied volatility has remained subdued. This may be related to options market activity and market maker hedging but it’s impossible to prove it despite claims in financial media. The simplest explanation is in most cases the best and in this case it’s related to dip buying. The mean-reversion dynamic caused by dip buying has waned significantly since its peak in December of last year, as discussed in this article. But the result of persisting mean-reversion is often higher realized volatility while implied volatility stays low. On the other hand, the best traders just accept price action for what it is and never try to look for explanations.

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Specific disclaimer: This report includes charts that may reference price target levels determined by technical and/or quantitative analysis. No updates to charts will be provided if market condition changes occur that affect the levels on the charts and/or any analysis based on them. All charts in this report are for informational purposes only. See the disclaimer for more information.

Disclaimer:  No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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