The stock market is surging today after Macron and Le Pen head to the run-off round in France
The stock market is soaring today, with the major U.S. benchmarks trading up at least 1% so far. Stocks are reacting to Sunday's first round of voting in the
French presidential election, with centrist Emmanuel Macron and far-right candidate Marine Le Pen advancing to the May 7 run-off round. However, there were numerous signs that fear was growing in the lead up to yesterday's results, suggesting today's price action could be a relief rally.
Large Specs Increase Long Exposure to Gold
The latest Commitments of Traders (CoT) report shows large speculators have increased their net long positions on gold -- often seen as a "safe-haven asset." These positions are now perched at their highest level since the week of the U.S. presidential election last November. What's more, gold futures settled last week up 3% month-to-date. Today, however, June-dated gold futures have tumbled 1.2% to trade at $1,274.10 per ounce.
Optimism Among AAII Respondents Hits a Pre-Election Low
The most recent American Association of Investors Intelligence (AAII) survey showed 25.7% of its respondents chimed in last week with bullish expectations for the
stock market over the six months. This is the lowest reading on bullish sentiment since Nov. 2. Conversely, the number of bearish and neutral respondents accounted for 74.3% of AAII members -- the highest reading since last November.
Options Traders Increase Bearish Exposure to European ETFs
Several exchange-traded funds (ETF) with exposure to the eurozone have seen an uptick in put activity recently. The Vanguard FTSE Europe ETF (VGK), which tracks major European markets, saw a 15,000-contract block of May 47 puts bought to open last Friday for $450,000 (number of contracts * $0.30 premium paid * 100 shares per contract). VGK had been stalling beneath $51 in recent weeks, but was last seen trading up 3.4% at $53.20, and was fresh off an annual high of $53.24.
Echoing this defensive stance taken by options traders, the SPDR Euro Stoxx 50 ETF (FEZ) and the iShares MSCI EAFE ETF (EFA) have put open interest docked near the top of their respective annual ranges. Put open interest on the iShares MSCI France ETF (EWQ), meanwhile, is at the top of its 52-week range, though the ETF just wrapped up its
best trading day on a percentage basis since August 2012.
Long Put Options Gain in Popularity
Elsewhere, Schaeffer's Quantitative Analyst Chris Prybal noted that the 10-day equity-only put/call volume ratio is beginning to move higher, indicating long put options are growing in popularity. The ratio is currently docked at 0.97, which is the highest reading since Nov. 16.
VIX Options Volume Flashes a Signal Not Seen Since Before Brexit
The CBOE Volatility Index (VIX) saw a rush toward calls last week, after April
VIX options expired. In fact, VIX call volume toppled 1 million contracts for two straight days -- something that hasn't happened since before last June's Brexit vote. VIX calls now outweigh puts by a more than 2-to-1 margin, with open interest docked 5 percentage points from a 52-week peak. With stocks surging today as the uncertainty of surrounding the French election temporarily subsides, VIX was last seen down 22.2% at 11.34 -- its lowest level since early April.