S&P 500 Risking a Pullback at the Week Ahead

Over the previous 24-48hrs, market volatility has picked up (thank you Fed), USD shorts are feeling the squeeze as hot reflation trades require a hit, whereas the precious metals complex'd come under significant strain.

S&P 500 Risking a Pullback at the Week Ahead

That having been said, this hasn't spread into the equity distance with US equities staying relatively steady. The Nasdaq 100 even climbed to a new record high as US returns dropped to pre-FOMC amounts because the 10yr trades south of 1.5percent again. The somewhat surprisingly stable nature in equity markets might be explained by quadruple witching, which occurs on the 3rd Friday of each quarter (March, June, September, December).

During quadruple witching days, single stock alternative & futures, index futures options expire. Normally, on nowadays, the simultaneous expiration could lead to massive volumes, increasing the danger of abnormal price actions. As I mentioned above, equities are marginally stable, among the ramifications of quadruple witching is that security costs can be immobilized to a particular strike price at expiration.

Currently once quadruple witching is from the way, there's a danger that equity markets can start to soften, possibly a delayed response to the FOMC's hawkish spin. Remember we are also going into a seasonally weak period for your equity distance.

Another indication I see for danger opinion is that the cyclical versus defensive danger barometer, which recently periods has been edging lower while the S&P 500 has stayed steady. An indication that may imply some froth should come off for danger belief.