There is definitely a ‘profit taking’ feel around things at the moment, as Oil and Crypto both sell off and Gold and the Dollar rally.

As we run into Thanksgiving, traditionally the ‘end of the year’ for a lot of trading funds, many market signals are being distorted; by options trading and gamma squeezes in equities and by forced unwinding of curve trades in the bond markets.

In Equity Markets, the near 5% rise in October effectively reversed the equivalent selloff in September as the market mechanics unwound, while bond markets saw the month close with sharply higher volatility and some very aggressive flattening of the yield curve at the front end, seemingly as central banks stopped buying in short dated bonds as part of a ‘tapering’ exercise.

After a weak September, Equity markets have recovered in the last few weeks as buy on the dips seems to have kicked back in (as well as some momentum chasing or buy on the rips) for a strong looking seasonal effect in the fourth quarter.

September turned out to be true to type, increased risk aversion in and around the triple witching mid month led to a spike in the price of put options (expressed as a higher VIX) and a modest amount of downward pressure on markets as the delta hedging by the market makers induced some further selling from systematic min vol funds.