With stocks in slow motion, traders and fund managers are finding big action in the commodity and currency markets.
The S&P 500 may be right at all-time highs, but it didn't move more than 0.6 percent on any day last week. That pales in comparison to the action in gold and crude oil, which traded in 4 percent and 2.5 percent ranges, respectively, on Friday alone.
It is this sort of rocky action that has led the volatility indexes of gold and oil to trade at elevated levels, even as S&P implied volatility has dropped to the lowest levels since September, after October's quick flush and rebound.
This isn't the consequence of more caffeine being served in the commodities trading pits. Since July, the U.S. dollar has been surging against other currencies, and the move has only been exacerbated by the announcement of further asset purchases from the Bank of Japan, and dovish words from the European Central Bank. Incidentally, this has also increased implied volatility in the dollar, with options on the PowerShares Dollar ETF now pricing in annualized volatility of 9 percent, which is up from 5 percent in the beginning of September.
The dollar surge, along with other factors, has put pressure on oil and gold. Commodities tend to enjoy an inverse relationship with the U.S. dollar, given that as each dollar becomes more valuable, it takes fewer of those dollars to buy an ounce of gold or a barrel of oil.
"The biggest story over the last few months have been the dollar strength as central bank policies have diverged, so we should expect commodities that are influenced by the dollar to be pushed around," said Jim Iuorio of TJM Institutional Services.