The Winds of Change

Eighty-nine percent of futures markets experienced a contraction of volatility in the first six months of 2017, which translates to a lack of trends for typical systematic Managed Futures managers for find Alpha from. Don’t look now – but there might be some needed movement taking shape in some markets. First up, the greenback. The U.S. Dollar Index is now off 10% on the year, breaking into new 16 month lows. Everybody is thinking: will this be the break lower that starts a prolonged downtrend – and if so – for how long?

Is it Hurricane Harvey? Is it Emerging Markets booming? Is it the Euro hitting 2 and a half-year highs (half of the Dollar index is measured against the Euro)? Is it the failure of Trump to pass major policy initiatives? Whatever the reason, the U.S. Dollar trend (up or down) is a friend of Managed Futures, and if it drops further into the 80’s, this might just be the trend many Managed Futures programs could take advantage of. This isn’t to say there are other future markets making moves. The V-shaped gold market is now hitting its highest levels since the election – and Copper is hitting two and a half-year highs.

For most of the futures markets, 2017 has been nothing but V-shaped reversals filled with range bound charts. At these new markers the winds of change? Is this what the majority of Managed Futures strategies have been looking for? Stay tuned.