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Stocks fell on the day, led lower by semiconductors, with the SMH dropping more than 4%. The $550 level is now critical, as it serves as both technical support and the put wall. A break below $550 would be a significant blow from both technical and options-market perspectives. Options flows are not supportive of the SMH either, with negative gamma positioning potentially contributing to greater volatility and larger price swings.
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To say that it could be a long way down may be the understatement of the year. Just to return to its March lows, the SMH would need to fall—get this—more than 30%
Meanwhile, the yen took another step toward oblivion today as USD/JPY climbed again, approaching a potentially significant breakout that could send the pair back to levels not seen since 1986, around 165-166. At this point, Japan appears to be running out of options to support the yen.
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In South Korea, the central bank raised interest rates last night, helping to strengthen the won against the dollar and pushing USD/KRW down to around 1,480. The won has gained roughly 5% against the dollar since the beginning of July, which is a substantial move in the foreign exchange market. Could the won be tied to the SMH? Possibly—it certainly appears that way.
At this point, South Korean inflows into U.S. equities make Japan’s look amateurish by comparison.
Maybe the CDS market knows a thing or two after all.
-Mike
Glossary by ChatGPT
- CDS (Credit Default Swap): A financial derivative used to measure or hedge the credit risk of a borrower or sovereign issuer.
- Gamma: An options risk measure that reflects how rapidly an option’s delta changes as the underlying asset price moves.
- Negative Gamma: An options market condition where hedging activity can amplify price movements, increasing market volatility.
- Put Wall: A price level with substantial put option open interest that often acts as an area of potential support due to dealer hedging activity.
- SMH: The VanEck Semiconductor ETF, a widely followed exchange-traded fund tracking semiconductor companies.
- Technical Support: A price level where buying interest has historically been strong enough to slow or reverse a decline.
- USD/JPY: The exchange rate showing how many Japanese yen are required to purchase one U.S. dollar.
- USD/KRW: The exchange rate showing how many South Korean won are required to purchase one U.S. dollar.
- Volatility: The degree of variation in an asset’s price over time, often used as a measure of market risk.
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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.