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Rates Soar To New Heights on September 25, 2023

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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9/25/23

#Stocks – $TLT, $MOVE

#Macro – $SPX, #Rates

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Stocks finished the day higher, climbing by 40 bps. Most of the gains came in the final minutes. It was clear that the 0-DTE crowd was trying to close the index over the 4,330 level, and accomplished their goal. Today’s most active options were the 4,330 and 4,440 calls for today’s expiration. So it seemed pretty obvious what the driver to the late-day surge was. Additionally, the put wall was at $4300, offering a support level early at the start of the trading day.

Bloomberg

The chart clearly shows that the level acted as resistance today, and it took a late-day surge to rescue the call option.

I do not think much changed today from a technical perspective as the index was barely changed in the longer-term time frame and most likely serves as a pause day.

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10-Yr Rate

The 10-yr rate rose sharply today, ten bps, a new high for the cycle. At this point, the next level of resistance comes around 4.7%.

20Yr + Bond ETF (TLT)

Meanwhile, the 30-year was up 13 bps on the day and closed at 4.66%, which drove the TLT down by 2.5% to close at $89.18. The ETF is coming up on an big level of support at $87.40. It could go lower from a technical standpoint, but I think that $87.40 would at least in the short term, offer a pretty healthy level of support to slow things down.

ICE BOFA Bond Market Volatility Index (MOVE)

This led to a big move higher in the ICE BOFA Bond Market Volatility Index (MOVE). But despite the big jump in the MOVE index, the VIX index was lower on the day.

We will have to see what tomorrow brings. I suspect the selling isn’t finished because rates are up a lot, and the move has been fast. At least for today, the put wall at 4,300 and the 0DTE crowd appear to be enough to save the day. As we move closer to Friday and the JPM Collar expiration date, I wouldn’t be surprised to see that put wall roll lower towards 4,200, which could open the path to a more significant drop.

More tomorrow.

-Mike

 

Charts used with the permission of Bloomberg Finance L.P. 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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