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The S&P 500 rallied on Tuesday, January 6, rising by roughly 60 basis points and barely eking out a new all-time high. It was somewhat striking to see the market advance on a day when Apple fell by nearly 2%, while Nvidia declined by about half a percent.
Most of the strength appeared to come from the semiconductor memory stocks, which feel distinctly late-cycle. When memory chip names are leading the market higher, it naturally raises questions about how much further this move can extend, at least in my view. Really, how many more times can Micron continue to rise by 10%?
All of this leaves the broader outlook increasingly uncertain. With so many indicators stretched and volatility measures already at very low levels, the market appears to be running on fumes, making the next meaningful move far from obvious.
The 1-month implied correlation index fell to 8.3, placing it at the very low end of its historical trading range. Historically, experience has shown that when implied correlations reach these levels, a market turn is often imminent.
Meanwhile, the VIX 1-day closed below 8. I would be shocked if the VIX 1-day is not above 15 by the close of trading on Thursday, given that we have a jobs report on Friday morning and a potential opinion from the Supreme Court on tariffs expected later that day.
But don’t worry—the bond market apparently does a better job of preparing for event risk, as the MOVE Index has risen over the past couple of days.
Meanwhile, BTIC S&P 500 Total Return futures (EFFR), or equity financing costs, have melted down, with the January 2026 contracts now trading below 60. Again, experience has taught us that the cash market tends not to perform well when declines of this magnitude occur.
The index has been range-bound, gaining less than 1% from its October 29 closing high, and the setup still looks very similar to what we saw at the start of 2022 and 2025. The 1966 track is not dead yet, either.
If correlations were higher, financing costs were stable, and volatility was higher, one could argue that another surge is imminent—and that may still prove to be the case. However, it would also require volatility metrics to be compressed even further, and I cannot handicap those odds.
-Mike
Glossary by ChatGPT
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Basis points: A unit of measure equal to one-hundredth of a percentage point, commonly used to describe changes in interest rates or yields.
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BTIC S&P 500 Total Return futures (EFFR): Futures contracts that reflect the financing cost of holding S&P 500 exposure relative to the effective federal funds rate.
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Equity financing costs: The implied cost of funding equity exposure, often inferred from futures or derivatives markets.
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Implied correlation index: A measure derived from options prices that reflects the market’s expectation of how closely individual stocks will move together.
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MOVE Index: A volatility index that tracks expected price fluctuations in U.S. Treasury securities.
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VIX 1-day: A volatility measure capturing the market’s expectation of S&P 500 volatility over the next trading day.
Disclosure
This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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