European woes aiding fresh uncertainty in the market

I stumbled across this chart posted by Cecile Vannucci on Twitter and found the observation thought provoking. The underlying instrument being studied is the SPDR EuroStoxx 50 ETF, a popular depository receipt listed on the New York Stock Exchange that tracks the movements of the EuroStoxx 50 index in Europe.

The activity being followed is the amount of short interest positions taken on a weekly basis with the vertical axis representing the level of quantity traded.

Analysing the chart,  the evidence of asymmetry is quite prominent when assessing the magnitude of volumes produced just in the last week when compared against preceding stages.

The closest figure in this set of data to come anywhere near this number happened almost a year ago however the volumes recorded in that particular registered 20 000 whereas the current aggregate sitting shy of 100 000 contract, a staggering five times the volume.

An anomaly or signs of things to come as the quantity of put options traded on SPDR EuroStoxx 50 ETF surges ... $FEZ pic.twitter.com/SJCdX0Si14

— Quinton Mendes (@CadeTradeR) February 6, 2017

Investigating further with charting, it immediately becomes noticeable that the EuroStoxx 50 has been confined to a downtrend since the second half of 2014 whilst only breaking free of this containment in recent weeks.

A lateral resistance just below $35 has acted as a catalyst for bearish traders to take advantage in the past with the prospects of this happening strengthening when used in conjunction with the information provided above.

SPDR EuroStoxx 50 ETF

With European political dynamics drifting into limbo in the months ahead, it's not surprising to see the state of play being set up.

Both the Dutch and French elections are bound to create uncertainty going into voting day on March 15th and April 23rd respectively with right-wing nationalism surging forward in the polls leading up to elections.

Added to this is the re-introduction yet again of the Greece debt crisis which hardly goes a year without shaking the institution of the EU.

A tricky political issue that refuses to go away but coincidently is responsible for claiming power away from ruling governments.

Unless something drastically changes, which is highly unlikely, the tone being set by financial market participants will ultimately remain until some resolve is found.