Euro Stoxx 50 has been trading within the down channel since April. The index broke out of that channel yesterday and is actually trading above the 200 day average for the first time since mid-June. 3500 is a big level to watch.
Euro Stoxx 50 is still a mean reverting index and you can see the 3500 level as the mean level that the index oscillates around.
Euro Stoxx 50 volatility, V2X index, is down substantially from the Trade War highs we saw in early July. On July 5th we wrote:
We pointed out a few days ago that volatility had spiked rather substantially and that “buying volatility is a late trade” and suggested, “don’t buy vol when you must buy vol when you can”.
This would now be levels where volatility is starting to offer cheap hedging and cheap options plays such as replacement strategies etc.
Note how the term structure of Euro Stoxx 50 has come in. Orange is today and green one month ago. Short-term maturities are relatively cheap.
Source: charts by Bloomberg