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Interesting times in the stock market. At 1 PM yesterday, it seemed the world was on the verge of collapse as the S&P 500 tested 5,950, seemingly poised to head straight for the JPM collar. Xers were tweeting that the Strait of Hormuz was closing, declaring oil would soon hit $150. They even shared charts tracking tankers, as though they’d suddenly become shipping experts.
But just like when Moses parted the Red Sea, everything shifted, and it was good.
Financial media decided Iran’s retaliation was less severe than feared, oil prices collapsed, and stocks surged. By evening, a ceasefire had been reached. Amazing how quickly things can change—as if the market had anticipated a ceasefire all along.
But in the meantime, when you have a 95 bps move followed by a 1.1% move, guess what? Realized volatility is bound to rise, especially when the 21-day realized vol is sitting at just 11.3. And it did—jumping to 11.8, even as the VIX dropped to 17.5.
This puts us exactly back where the index stood on June 12. It also means future moves higher must become significantly smaller if the index is to keep rising without pushing implied volatility up. Sure, we might jump another 1%, 2%, or even 3% tomorrow, but watch closely as the VVIX starts to climb, with the VIX soon following—creating the vaunted “spot up, vol up” scenario.
Anyway, the cycles for the S&P 500 are supposed to be rolling over. Will this be the time the cycle doesn’t work? I don’t know. However, the 120-day cycle has been remarkably consistent—sometimes it’s late, sometimes it’s early, but it’s always arrived.
(CYCLES)
But more importantly, the 180-week cycle, which we began discussing back in September, still suggests that this cycle is in its early innings—and historically, this cycle has tended to deliver. One notable aspect is that, during large bull markets, the cycle sometimes produces sideways trading action instead of driving the index sharply lower. We may currently be in a sideways cycle, potentially lasting until October… of 2026. Of course, I don’t know for sure—nobody does—but that’s what the cycle suggests.
(CYCLES)
Finally, general collateral rates traded up to 4.4%, suggesting SOFR should move a bit higher tomorrow as we enter the end-of-quarter liquidity squeeze. Additionally, once the Big Beautiful Bill passes, the Treasury General Account (TGA) will likely need replenishing, depending, of course, on the Treasury’s target balance.
What’s really lost in these commentaries is my sense of humor and sarcasm—I’ve never quite figured out how to capture that in written form. But I’ve been watching plenty of Netflix with closed captions on (eyebrows raised), so perhaps we can sprinkle that in somehow (smirk).
I could also try stand-up comedy (with a big smile), if this market thing doesn’t work out.
-Mike
Terms By ChatGPT
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General Collateral (GC):
A standard rate for borrowing/lending cash secured by general, widely acceptable securities (typically Treasury securities).
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SOFR (Secured Overnight Financing Rate):
A benchmark interest rate reflecting the cost of borrowing cash overnight, secured by U.S. Treasury securities.
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TGA (Treasury General Account):
The U.S. government’s checking account held at the Federal Reserve, used to manage daily financial transactions, including government spending and debt issuance.
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VVIX:
An index measuring volatility of volatility—specifically, it tracks the expected volatility of the VIX itself.
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Spot up, Vol up Scenario:
A market condition where stock prices (“spot”) rise simultaneously with implied volatility (“vol”), often indicating cautious market sentiment and hedging behavior.
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Implied Volatility (IV):
The market’s forecast of expected future volatility derived from options pricing.
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Realized Volatility:
The actual historical volatility observed in an asset’s price movements over a given period.
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JPM Collar:
A specific options-based hedging strategy often referenced due to JPMorgan’s large structured hedging positions, frequently influential around key strike prices.
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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.
Subscribe to receive this FREE daily commentary directly in your email
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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