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The S&P 500 finished the day flat, with not much happening. It was actually a fairly uneventful trading session, as most of the action took place in the precious metals market, where gold plunged.
When looking at the intraday structure of the S&P 500, the index has consistently struggled to break above the 6,750 level, which has served as resistance since October 3. It will likely take a gap higher to overcome that barrier. Otherwise, the more probable outcome is a retracement to refill the gap near 6,660. The recent straight-line rally has formed what appears to be a diamond reversal pattern, suggesting the index may not only revisit 6,660 but could eventually decline toward 6,600.
Gold prices fell by 5.5% today. What’s most interesting about this move is that not only did the price drop, but implied volatility for gold — measured by the GVZ — also declined. It’s notable, and likely not coincidental, that gold had been rising alongside implied volatility. That combination has all the hallmarks of a classic gamma squeeze.
It may also be no coincidence that gold started to weaken right after options expiration on Friday, the 17th. The fact that both price and implied volatility are now falling suggests the recent rally may have been largely speculative. Typically, after a gamma squeeze plays out, we see a sharp and painful unwind, which implies that gold could retrace and give back much of its recent gains.
Additionally, the HYG high-yield ETF was weaker on the day. While it has largely recovered from its sharp sell-off on October 10, it continues to face resistance around the $81 — an area that has proven sticky. From an intraday perspective, the chart shows what appears to be a potential rising wedge pattern forming, which typically signals a bearish setup. This suggests the HYG could give back its recent gains and potentially fall back below $80.
-Mike
Glossary by ChatGPT
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Diamond Reversal Pattern – A technical chart formation indicating a potential shift from an uptrend to a downtrend.
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Gamma Squeeze – A market event where rapid buying of options forces market makers to buy the underlying asset, driving prices higher until the effect reverses.
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Gap Fill – A technical concept where an asset’s price retraces to close the space between prior trading ranges created by a gap up or down.
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GVZ – The CBOE Gold Volatility Index, which measures implied volatility in gold prices.
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High-Yield ETF (HYG) – An exchange-traded fund that tracks a basket of high-yield (junk) corporate bonds.
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Implied Volatility – A metric reflecting the market’s expectations for future volatility based on option prices.
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Rising Wedge – A bearish technical pattern that forms when price moves higher while the trading range narrows.
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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