Weekend Crossmarket Fallout from Overseas News

Feb 21, 2011: 8:57 PM CST

If you are just returning from a vacation this three-day weekend, you may be shocked to find high volatile moves in the futures markets.

Let’s take a quick end-of-holiday look at four cross-markets to see the fall-out (big moves up and down) as a result of violence spreading through Africa – namely Libya.

While the US Stock Market was closed Monday, the futures markets were not.

As of Monday evening, here are the following moves off the lows seen Friday the 18th:

Silver us up over 8% (up $2.50)

Gold surged $27, placing price back above $1,400 – up 2%

The big news is Crude Oil – surging $8.50 with a 9.5% gain.

The news is focusing on potential oil supply disruptions if protests turn violent – unlike the resolution in Egypt.

The S&P isn’t taking the news very well – it’s down about 1% – lower by 13 points.

The events are a reminder to traders of the sudden volatility of the commodity markets vs. the S&P 500 – supply shocks (also called exogenous shocks) can send price surging overnight like this.

Commodity markets offer higher potential returns due to spikes like these in volatility, but those who were shorting these markets are cursing the sudden volatility.

The cross-market fall-out will affect trading activity as we start the shortened week Tuesday morning so take extra time this evening and in the morning to check markets, check open positions, and be prepared to act accordingly – and of course watch news closely in these events.

Corey Rosenbloom, CMT
Afraid to Trade.com

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5 Comments

5 Responses to “Weekend Crossmarket Fallout from Overseas News”

  1. Guest Says:

    Anything happen to Bond / Interest Rates? I'm wondering about what is going to happen with IEF and TLT. Thanks.

  2. Corey Rosenbloom, CMT Says:

    That's a good question – for those and related ETFs to the markets above (SPY, GLD, SLV, and USO – though there are other similar/related ETFs), we're going to have to wait for the pre-market session and take stock then. Looks like bonds are up on the news but not significantly.

  3. Guest Says:

    Thanks. I found the bond futures here: http://finviz.com/futures_char

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