Dollar Rally and More Market Mysteries

Mysterious dollar rally: careful trying to explain the stock gyrations in this market. Look what we have today: 1) continuing light volume, 2) quadruple witching expiration (quarterly expiration of stock and index futures, and stock and index options) on Friday, and 3) going into end of the year.

What does the end of the year have to do with anything? It's not usual to get funds degrossing, where they take up or down positions. So fund XYZ may be taking down 10 percent of their book...and if it is a crowded trade...and they are all long or short similar can have strange movements with little obvious explanation.

Look at what happened this morning: one of the most crowded trades of the year has been short dollar/long commodities/long commodity stocks.

This morning, the dollar strengthened notably at 10am ET as the Philly Fed headline number came in much better than expected, even though the employment component was weaker. This is not normally a market mover; but given the calendar this is a good excuse to cover part of your dollar short position as you close out your books...and that is what appears to have happened.

Another anomaly: stocks, for the most part, rose mid-morning as the dollar was rallying.


  • Quadruple Witching Is Near, but Don't Expect a Freaky Friday

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