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Lock in sale →The stock market finished the day higher, recovering losses from Monday and Tuesday, while oil prices swung significantly throughout the session. What is very clear is that oil remains highly susceptible to headline risk. While I do not have hard data to support it, it feels as though the magnitude of those headline-driven swings may be narrowing, perhaps reflected in the symmetrical triangle pattern that continues to develop.
The only issue I have with the triangle is determining which oil price version to use, because contract rolls and the volatility around them make it difficult to maintain a clean, consistent pattern.
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The only notable thing, though, is that while the front-month contracts and CFDs are showing one picture, the December 2026 contracts are clearly in an uptrend.
Anyway, Nvidia reported results tonight, and there were really no surprises when it came to the typical beat-and-raise numbers. There was not much of a surprise in the muted post-earnings move either.
The road higher for Nvidia may become more challenging over the next few days. There were a significant number of calls priced above $230 that are likely to see a substantial amount of premium burned off tomorrow, which could release dealer flows.
I guess the bottom line is that if Nvidia cannot clear those resistance levels at $230 and beyond, I would not be surprised to see the stock drift back into the $195 to $200 range.
With Nvidia now behind us, we should be reaching the point in the cycle where dispersion really starts to unwind. I just do not see why it should not. Index-level volatility has hardly moved over the past few weeks, while single-stock volatility remains incredibly high. That has left market dispersion very stretched and, at this point, likely a crowded trade.
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The spread between the VIXEQ, which measures constituent volatility, and the VIX, which measures index volatility, is around 25, which is historically near the widest end of its range. It would be surprising to see that spread widen much further from here. That is not to say it cannot get wider, but I would be very surprised if it did.
At this point, realized dispersion by sector remains extremely lopsided, with XLK outperforming the S&P 500 by 15.4 percentage points, while every other sector continues to underperform the index. On a five-year lookback, we are still essentially in fantasy land — around the 1st percentile.
At some point, something will have to give, and Nvidia’s results seem to me to be a good resetting point.
-Mike
Glossary by ChatGPT
- CFD (Contract for Difference) — A derivative instrument that allows traders to speculate on price movements without owning the underlying asset.
- Contract Roll — The process of closing a futures contract nearing expiration and opening a later-dated contract to maintain exposure.
- Dealer Flows — Trading activity by market makers hedging options exposure, which can influence short-term stock price movements.
- Dispersion — A measure of how differently individual stocks or sectors perform relative to the broader index.
- Front-Month Contract — The nearest expiring futures contract, typically the most actively traded.
- Headline Risk — The risk that news events or headlines rapidly move market prices.
- Implied Volatility — The market’s forecast of a security’s expected future volatility derived from option prices.
- Realized Dispersion — The actual observed divergence in returns among stocks or sectors over a given period.
- Symmetrical Triangle Pattern — A technical chart formation characterized by converging trendlines that often precedes a breakout move.
- VIX — The CBOE Volatility Index, which measures expected volatility for the S&P 500 Index.
- VIXEQ — A volatility measure tracking the implied volatility of individual S&P 500 constituents rather than the index itself.
- XLK — The Technology Select Sector SPDR Fund, an ETF representing the technology sector within the S&P 500.
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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.
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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