Eurostoxx arrives at the 'witch hour' of the year at 5% deleting the pandemic

1. D. Y.

This is the most important witch hour of 2020, one of the most unusual exercises in financial history, which in terms of the behavior of the main indices could end as if nothing had happened despite the health, social and economic shock without precedents of the coronavirus pandemic.

How to Open Multiple Images As Layers in Photoshop Using Bridge: Quite often, you will want to work with vario.. http://t.co/jfcRM4DitQ

— World Info Mon Jun 23 00:13:56 +0000 2014

The EuroStoxx 50 could come out of the session of the quarterly maturities of the futures contracts that are negotiated on the selective itself, on companies or on other stock market indices prepared to face a Christmas rally that if it reaches 5% will serve to erase the losses of the year for the main European benchmark. A fact that has been signed for weeks by the Chinese indices, those of Wall Street and since the last days the Dax 30 of Germany, which already gains 2% in 2020.

What happens in the quadruple witch hour is that the trading volume skyrockets as futures contracts have to be renewed (rolar) or closed upon expiration, which, beyond increasing volatility, establishes the positioning of speculators on the next months of the market.

Quarterly futures expirations mark the positioning of speculators

Joan Cabrero, advisor to Ecotrader, warns that in recent years the quadruple witching hour has lost some importance because these decisions are made with something more in advance, and not suddenly at the last moment. But in this 2020, in which the market has been completely uncorrelated from the harsh reality of the crisis due to the expectations of the vaccines, the economic reconstruction funds and the historic monetary stimuli, it is once again a turning point that could confirm a continuation of the rally that the European indices have been leading since the end of October.

The Dax accumulates a rise of 18% in this period and is close to recovering levels prior to the Covid crash that began in February. Behind this behavior is the recovery of the procyclical and exporting companies of the industrial engine of Europe despite the pandemic, the appreciation of the euro -to 2018 highs-, the uncertainty about Brexit and the underlying risk of the trade war.

Dax strength

"The near term still looks very challenging" as "the [European] service sector continues to decline" due to restrictions imposed in several countries to curb contagion, Chris explains Williamson, chief economist at the IHS Markit consultancy (responsible for preparing the leading PMI activity indices). But in the stock markets there is no room for certain reflections when looking for investment opportunities, especially when there is plenty of liquidity and interest rates are at their lowest as a result of the ultra-expansionary policies of the central banks.

Perhaps an even clearer example than the Dax 30 of the current cyclical bias in the parquets is the Ibex 35. The main Spanish index has risen 27% since the end of October, although it started from further behind due to the weight of the banking, the travel industry and infrastructure and is still much further away from erasing the losses in 2020.