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Stocks closed higher, with the S&P 500 up around 50 bps. The VIX 1-day completed its reset, dropping to an intraday low of around 8. With the jobs report on Wednesday, I would expect the VIX 1-day to rise and close higher tomorrow.
Tomorrow, there will be a settlement of about $40 billion in T-bills, followed by another $22 billion on Thursday.
The combination of the cash drain and rising implied volatility could set up an interesting trading session. We know that stocks tend to be weak on settlement days and that rising implied volatility pushes stocks lower most of the time. So I would expect tomorrow to be a challenging day. I’m obviously not a fortune-teller, but that is what the mechanics would suggest. There is a good chance the market rallies on Wednesday following the job report, once volatility has subsided, but Thursday could be a repeat of Tuesday.
I counted 24 settlements since October 28, during which T-bills drained liquidity. In December, T-bill issuance was reduced, thereby adding liquidity to the market. On 8 of those settlement dates, the S&P 500 was higher; on 16 days, it was down.
Now watch the S&P 500 go up 2% just to screw with me….LOL
-Mike
Glossary by ChatGPT
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Implied Volatility: The market’s expectation of future price fluctuations, derived from options pricing.
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Jobs Report: A key economic release detailing employment conditions, typically referring to U.S. nonfarm payrolls data.
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Liquidity: The availability of cash or easily tradable assets in the financial system to support market activity.
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S&P 500: A market-capitalization-weighted index representing 500 large publicly traded U.S. companies.
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Settlement Day: The date when cash and securities are exchanged to finalize a financial transaction.
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T-Bills (Treasury Bills): Short-term U.S. government debt securities with maturities of one year or less.
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VIX 1-Day: A measure of expected volatility in the S&P 500 over the next trading day, based on options pricing.
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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