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It was a rough day for stocks, with the S&P 500 finishing lower by about 1%. It was the second time this week the index has fallen by more than 1%. Once again, the index rebounded off its midday lows before giving way in the final 30 minutes of trading.
Interestingly, over the past two sessions, I’ve observed that the market-on-close imbalance for the New York Stock Exchange, typically released at 3:50 p.m. Eastern, has been small. But today, after 3:55 p.m., when the NASDAQ imbalance was released, it swelled to about $2.5 billion in sell orders. That suggests much of the heavy selling continues to be driven by the mega-cap tech names—and potentially that CTAs have turned into sellers at these levels.
The S&P now finds itself in a negative gamma regime, and for today at least, the put wall at 6,700 helped support the market at that lower level. In fact, the index hit a low of 6,709 on the day, suggesting that the 6,700 put wall was clearly in play—likely contributing to the midday rally as some puts were closed out.
The question now is where the put wall will be tomorrow. If the 6,700 level has been largely exhausted, the next put wall could shift lower, possibly toward 6,500. We’ll have to wait until the morning to confirm.
The index closed below its 20-day moving average today and slipped under support at 6,750. This now sets up the next key level of support at 6,665, which coincides with the 50-day moving average. A break below that level would open the door for a move back toward the 6,500 area.
Momentum has also clearly weakened. The RSI is breaking lower, and with the lower Bollinger Band near 6,560, there isn’t much technical support to keep the market steady if it starts to drift and falls below the 50-day moving average.
It turns out that Oracle’s 36% surge back in September was peak Stupidity. The entire gain is now gone.
The only thing that may turn out to be worse than the Oracle move was SoftBank’s near-400 % move from the April low to the October high.
Meanwhile, IV in SoftBank is still pushing the mid-70% range. GAMMA – SQUEEZE
Finally, liquidity did not improve much this past week. Reserve balances at the Fed still sit below $2.9 trillion. Liquidity shall remain tight for some time to come.
The good news is that next week will only see $37 billion in Treasury settlements, with another $27 billion on Monday, the 17th.
-Mike
Glossary by ChatGPT
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Bollinger Band: A technical indicator that measures market volatility using a moving average and standard deviation bands.
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CTA (Commodity Trading Advisor): A professional investor or fund manager who uses systematic trading strategies, often in futures and options markets.
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Gamma: A measure of how much an option’s delta changes when the underlying asset’s price moves; high negative gamma can increase market volatility.
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IV (Implied Volatility): The market’s forecast of a security’s potential price movement, derived from option prices.
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Market-on-Close Imbalance: The net difference between buy and sell orders scheduled to execute at the close of trading.
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Negative Gamma Regime: A market condition where option dealers’ hedging activity amplifies price swings instead of dampening them.
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Put Wall: A concentration of put option open interest at a specific strike price that can act as a temporary support level.
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Reserve Balances: Funds that commercial banks hold on deposit at the Federal Reserve, influencing overall market liquidity.
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RSI (Relative Strength Index): A momentum indicator that measures the speed and change of price movements to identify overbought or oversold conditions.
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.
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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