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VIX Curve Inversion Does Not Bode Well For The S&P 500 - US Market Open

VIX Curve Inversion Does Not Bode Well For The S&P 500 - US Market Open

2020-01-27 14:00:00
Justin McQueen, Analyst
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MARKET DEVELOPMENT EUR/USD, S&P 500 Analysis

Equities: Global equity markets are on the back as coronavirus continues to spread. As it stands, there is over 2800 cases with the death toll rising to 81. In turn, markets have seen a shift to safe-havens with gold and US treasuries picking up, while oil remains offered. Given that is it difficult to assess to extent to how far the virus has spread, investor angst will likely persist leading to a lift in market volatility.

VIX CURVE INVERSION

Meanwhile, across VIX futures, the curve has now inverted (backwardation), which in turn highlights that investors are concerned about the near-term prospects for equity-market returns. As such, given that this does not bode well for the S&P 500, eyes are for a modest pullback.

VIX Curve Inversion Does Not Bode Well For The S&P 500 - US Market Open

EUR: Italian political risks eased slightly following the regional election in Emilia Romagna. The Democratic Party managed to maintain their hold in the region winning by 51.4% against Matteo Salvini’s League party who secured 43.66%, consequently, Bund/BTP bond spreads have tightened, while the FTSE MIB is performing better relative to its counterparts. As such, while concerns will continue to linger over the coalition governments stability, near-term election risks appear to have receded somewhat.

EUR/USD BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 20% -3% 3%
Weekly 26% 4% 10%
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VIX Curve Inversion Does Not Bode Well For The S&P 500 - US Market Open

Source: DailyFX, Refinitiv

Economic Calendar (27/01/20)

VIX Curve Inversion Does Not Bode Well For The S&P 500 - US Market Open

Source: DailyFX,

WHAT’S DRIVING MARKETS TODAY

  1. British Pound (GBP) Latest: GBP/USD Respecting Support as BoE Decision Nears” by Nick Cawley, Market Analyst
  2. Gold Price Turns Bullish as Coronavirus Fears Spur Flight to Safety” by Paul Robinson, Currency Strategist
  3. Crude Oil Prices Plunge on Coronavirus Latest: Traders Badly Positioned” by Justin McQueen, Market Analyst

--- Written by Justin McQueen, Market Analyst

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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