24 January 2017 at 1:01 GMT
- Japanese stocks soared 2.2% last week, although they've retreated since then
- Palladium is a metal to watch, given strong car sales in the US and China
- Plenty of corporations are making Q4 earnings announcements this week
- The market is barely blinking in the face of these announcements
By Georgio Stoev
Equity markets finished largely unchanged in a shortened trading week last week. US markets were closed on Monday for Martin Luther King day.
Something to smile about... analysts are upbeat about palladium, a metal used in catalytic converters, given robust car sales in China and the US. Photo: iStock
Japanese equities however showed a strong performance and finished up 2.2% for the week. Underlying JYH7 futures also finished on a strong note, but they are yet to break above its seven-week resistance at 0.008892.
We are seeing some short-term strength in the price, at least indicated by the by +DI approaching 30 and rising.
Source: Saxo Bank.
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Metals, particularly palladium (PAH7), made a new 52-week high last week. The metal is up 15% for the year and analysts are calling for continuous strength on the back of healthy auto sales in the US and China.
Palladium shows strength
prices seem to continue to consolidate, we have a call spread $56 to $57/barrel, with resistance now clearly near $55/b. The options market seems to support further consolidation in the underlying futures for March delivery (CLH7) with high interest in $55 calls and $51 puts strike prices.
The weekly oil inventory comes on Wednesday (please see calendar
). Traders seem to be increasingly extending to using futures options on crude oil to hedge position or to look for volatility moves.
Speaking about volatility, the Chicago Board Options Exchange index (VIX) seems to be also locked in a range with intraday highs of $12.64.
At the time of writing this article, we attempted to break above this level but without much push. In fact the underlying futures, VXH7, are making a new low at $14.90.
What would elevate volatility these days? Certainly not corporate earnings. We are in the midst of Q4 earnings announcements, and the market is barely blinking. On January 24, we should hear from online retail giant Alibaba Group Holding (BABA), steelmaker AK Steel (AKS), lighting manufacturer Cree (CREE),Vertex Pharmaceuticals (VRTX) and others.
After the bell at the close of trading on Tuesday, surgical instrument maker Intuitive Surgical (ISRG) will report its earnings. Too bad we don't support options for the last one, as the implied volatility is busting by its seams on the medical equipment maker. The market is pricing in a 10% move.
Later this week, we have reports from aircraft maker Boeing (BA), pharmaceuticals firm Bristol Myers (BMY) and on Thursday we should hear from construction and mining equipment maker Caterpillar (CAT), internet search giant Alphabet Inc (GOOGL) and coffee outlet chain Starbucks (SBUX), among others.
Starting this Wednesday, OptionsLab is kicking off monthly webinars with the Chicago Board Options Exchange's one and only Russell Rhoads, also known as Dr. VIX. Make sure and reserve your spot right here
Have a great week!
– Edited by Robert Ryan
Georgio Stoev is futures and options product manager at Saxo Bank