What a choppy week in the markets overall, making it difficult to establish long term core positions. The "FOMO" trade appears to be on both sides in multiple asset classes, everything from Bitcoin, Energies, Grains, Meats, Metals, and U.S. Equities. There are two ways to identify when a market is going through a transitional change. The first is to watch the volatility index on the underlying asset. For example, when U.S. Equities have a volatility index below 20, trading appears to be "easy" as long as you trade with the trend. When we get a market like what we see right now, the volatility is bouncing between 21 and 29, giving traders the feeling of "Comfort" one-day "Panic" the next. The second way to Identify how traders perceive the market is to look at implied volatility premiums on options. When implied volatility is high and rising on minor corrections, traders immediately liquidate and/or panic buy protection.
Gold continues to face the same emotional roller coaster with a massive selloff down to $1800/oz followed by a "rip-roaring" rally on Wednesday. We have been structuring trades in the Gold market through calculated risk call spreads geared for the back half of 2021. At that point, we would anticipate 10-year yields will have eased off, and the anticipation of the recovery cycle will have peaked, leaving the Fed to search for new creative ideas to support the economy. The best chance for a near term upside momentum move would be Wednesday in the post-meeting press conference where Jerome Powell could indicate support for additional accommodative fiscal measures.