Cboe Global Markets

The Week that Was: November 15 to November 19

Kevin Davitt
November 22, 2021

A concise weekly overview of the U.S. equities and derivatives markets

Last week (November 15 – November 19), the S&P 500 Index moved in a very narrow range. So far, the S&P 500 Index has reached 66 new highs in 2021. The broad market continues to weigh a strong recovery and corporate profits against inflation fears, supply chain issues and rising COVID-19 infection rates. Growth stocks have markedly outperformed value stocks in recent weeks. The Consumer Discretionary sector, which includes Amazon and Tesla, was particularly strong last week. Last week’s retail sales data was strong. That data point was higher by 1.7% in October, the largest increase since March 2021. Industrial production and manufacturing numbers have also been increasing.

The week ahead is shortened because of Thanksgiving in the U.S. Equity markets are closed on Thursday and the trading day ends at 12 p.m. CT on Friday. Happy holidays!

Quick Bites

Indices

  • U.S. Equity Indices were mixed last week.
  • S&P 500 Index (SPX®): Increased 0.32% week-over-week.
  • Nasdaq 100 Index (NDX): Increased 2.3% week-over-week. 
  • Russell 2000 Index (RUT℠): Decreased 2.9%. week-over-week.
  • Cboe Volatility Index (VIX™ Index): Measured between 19.01 and 16.03 last week and ended the week at 17.91.

Options

  • SPX options average daily volume (ADV) was 1.46 million contracts per day, slightly higher than the previous week’s average of 1.42 million contracts per day. The one-week at-the-money (ATM) SPX options straddle (4700 strike with an 11/26 expiration) implies a +/- range of about 1%.
  • VIX options ADV was about 480,000 contracts last week, which was above the previous week’s ADV of 420,000 contracts. The VIX options call-put ratio was 1.08:1.
  • RUT options ADV was 55,000 contracts, down from the previous week’s ADV of 56,500.

Across the Pond

  • The Euro Stoxx 50 Index decreased 1.9% on the week.
  • The MSCI EAFE Index (MXEASM) decreased 1.06% week-over-week and the MSCI Emerging Markets Index (MXEFSM) decreased 1.34% week-over-week.

Charting It Out

Observations on VIX futures term structure

  • The VIX Index increased week-over-week, adding about 1.60 and closing at 17.91.
  • The November VIX futures expired on Wednesday, November 17, and cash settled at 16.45.
  • The December VIX futures gained 0.55, ending the week at 20.60, and the January VIX futures contract added 0.65 and closed at 22.60, meaning the current Month-1 vs. Month-2 spread settled at 2.00 wide.
  • The standard December VIX futures and options is a five-week cycle.
  • The VIX futures term structure moved higher across maturities.

Source: LiveVol Pro

Macro Movers

  • The U.S. 10-year Treasury Yield climbed to 1.65% on Wednesday from last Friday’s settle at 1.58%. The 10-year yield closed the week lower by 4 basis points, at 1.54%. Short-term historical volatility measures for the 10-year yield remain elevated.
  • The S&P GSCI fell 2.15%. Crude Oil (both Brent and WTI) declined throughout the week. Talk of the U.S. tapping the Strategic Petroleum Reserves drove some of the selloff. Energy is weighted heavily in the GSCI Index.
  • Silver and Gold sold off 2.8% and 1.2% respectively.
  • Natural gas rebounded after an early November selloff and rallied 6% on the week.
  • The S&P 500 Index leaders had a big week with Big Tech stocks gaining across the board.
  • Alphabet gained 0.17% and Facebook/META added 1.3%.
  • Microsoft continued to grind higher, adding 1.90% to reach new all-time highs.
  • Apple stock jumped 7% week-over-week and also reached new highs after announcing its intent to offer self-driving cars by 2025.
  • Not to be outdone, Tesla jumped 10% last week, following a significant selloff in early November.

Major Cryptos

Bitcoin

  • Last week Bitcoin (BTC) traded between $66,300 and $55,600. The eight-day peak-to-trough drawdown was 19.4%. 
  • Bitcoin ended the week at $58,000, down 10% week-over-week.

Ethereum

  • Ethereum (ETH) traded between $4,760 and $3,960 last week.
  • ETH ended the week at $4,260, down 1.9% week-over-week.

Digital Asset Industry

  • Last week’s market selloff was the largest decline for the digital asset market since May 2021. The recent U.S. infrastructure bill seemed to be the primary catalyst, as the legislation shifts the reporting requirements for digital asset brokers and market participants.
  • On Tuesday, November 16, a new VanEck sponsored Bitcoin futures ETF launched (ticker XBTF) on Cboe Global Markets’ exchange.
  • Meta/Facebook continues to tout its efforts to create and grow a metaverse which could incentivize digital asset utility.

Coronavirus

  • The COVID-19 infection rate in the U.S. fell from early September highs of around 175,000 to approximately 70,000 in early November. However, over the past few weeks the rate has been creeping higher and is currently approximately 86,000.
  • 59% of the U.S. population is fully vaccinated against COVID-19 and 69% have received at least one dose of a COVID-19 vaccine. For just those 12 years and older, the numbers are 69% and 80% respectively.
  • The upper Midwest currently has the worst infection rates, with Michigan and Minnesota struggling the most.
  • About 1.4 million new COVID-19 vaccine doses are administered per day in the U.S. That number continues to tick higher as more children get vaccinated and boosters become available.
  • Globally, the 7-day average has climbed from approximately 465,000 to approximately 498,000.

COVID-19 Infection Rate in the U.S.

Source: The New York Times

Tidbits from the News

  • Coffee is the latest commodity market to move toward decade high prices. Brazil, which suffered a drought and early frost, and Columbia are the largest producers of Arabica coffee. Front month coffee futures are approaching $2.40/pound, up 125% from this point last year.

Continuous Front-Month Coffee (Arabica) Futures from 1973 to Now

Source: Barchart

  • U.S. bonds with differing durations typically move in the same direction. In other words, if yields are moving up in the short-dated bonds, they typically move higher further out on the curve, as well. However, over the past few years that relationship has been much weaker than the historical trend. The fixed income market continues to grapple with the prospect of inflation in the near term and deflationary long-term pressures from technology and demographics.

Long and Short Rates' Correlation Nears 50-Year Low

Source: Trahan Macro Research/The Daily Shot

  • Cboe Global Markets launched extended Global Trading Hours (GTH) in SPX and VIX options on Sunday, November 21. The New York Federal Reserve Bank and Professors Oleg Bondarenko and Dmitriy Muravyev have published significant research into the broad market’s (S&P 500 Index) tendency to experience most of its gains during global trading hours. The graph below illustrates returns for the S&P 500 Index ETF during the overnight session as well as normal U.S. trading hours going back nearly 30 years.

SPY Equity Overnight Returns During Daytime Returns

Source: Susquehanna Investment Group/The Daily Shot

The Week Ahead

Data to be released this week: Existing Home Sales on Monday; Market Purchasing Managers Index on Tuesday; Initial Jobless Claims, Gross Domestic Product Revision, Durable Goods, Core Inflation, Five-Year Inflation Expectations, University of Michigan Consumer Sentiment Index, Federal Open Market Committee (FOMC) meeting minutes on Wednesday.

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