It has been another volatile morning on the equity markets. There have been a whole raft of key driving factors that have pulled investors one way and then the other. As the US session gets up and running the chances are that the volatility will remain elevated. The last week has seen volatility on the European indices spike higher. The reaction to the oil price slide (deemed negative) and the improvement in the Eurozone flash PMIs (deemed as a positive) and the jump in the German ZEW Economic Sentiment to 34.9 (a positive because it was well above the 20.0 expected) has sent the DAX on a wild ride today. Just in the morning session alone, the index has had a range of more than 200 points. Having been down over 100 points and then up over 100 points, the DAX has slid back once more (as the Russian Rouble has been hammered as the morning has progressed, see below). The chart below shows that volatility remains high and history tells us that with volatility remaining high equity markets will not be rallying. Only once the volatility starts to fall back might the DAX be primed for a rebound and perhaps we can see a Santa Claus Rally. Equity markets are not the only asset class under significant volatility, as forex markets are also having a rough time of late. Euro/Dollar finally looks to be turning a corner (at least near to medium term) with a move above $1.2530, whilst Cable inexplicably is also over 100 pips higher (despite weaker than expected UK inflation). Not only that, we have seen Dollar/Yen sliding by over 2 big figures to seemingly complete a head and shoulders top pattern that implies a move back towards 112.60. However it is the Russian Rouble which is the major story of the day. The rate hike of 6.% by the Russian central bank initially looked to have done a job, but since the early European session, the markets have just absolutely smashed the Rouble. The Dollar/Rouble rate is now up over 17% on the day in an incredible run higher which has gone almost parabolic today as traders have panicked out of a currency that is being hit by the ongoing decline in the oil price and economic sanctions. It is anyone’s guess where this is going to stop today, however these moves tend not to go in one direction and stay there. It is often the case with moves such as this, that once the direction turns, the retracement can also be hugely volatile. The rough ride is likely to continue.