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9.2.24
#MACRO: $SPX, $NDX, $VIX, $USDCAD
#STOCKS: $NVDA,
- Time For The Dust To Settle
- RTM: The Final Act?
- RTM: Yield Curve Steepening Continues
- RTM: Bulls May Be Too Optimistic On Broadcom’s AI Prospects Heading Into Earnings
- RTM: Long-Term Cycles Are Calling For A Major Market Top
- Live Sessions To Restart 9.6.24 At 8:15 AM ET, For Job Report
Stocks rallied into the close on Friday afternoon due to a $6.5 billion buy imbalance, which overwhelmed the market in an illiquid trading session ahead of the three-day weekend. As we have discussed, the market-on-close buy imbalance starts building around 2 PM ET, with the final size released at 3:50 PM ET. We can see that the S&P 500 turned higher on Friday at 2 PM, almost to the second.
This suggests that many gains from the final two hours of trading could vanish when we return from the Labor Day weekend on Tuesday morning. The end-of-day rally likely had more to do with month-end rebalancing than a genuine bid to buy or sell securities.
From a cycle perspective, we are approaching a peak that has effectively been calling market bottoms and tops based on their oscillations. This suggests we may enter a period where the market could move lower this week, at least according to the hourly chart.
One thing to consider this week is that we are likely to see increasing levels of volatility, particularly as we approach the jobs report on Friday. The VIX 1-Day will be key here, as it seems likely that both the VIX and the VIX 1-Day will rise sharply leading into that release. Given the significance the market is placing on this report, it seems probable that we will see a similar reaction as before.
Additionally, this week’s report will likely influence whether the Fed cuts rates by 25 or 50 basis points at the September meeting. If the VIX reaches the 20 range by Thursday, it might indicate that the market rallies on Friday, assuming the data isn’t a complete disaster. However, if the NFP comes in weak or the unemployment rate is higher than expected, I would expect the VIX 1-Day to remain elevated, and we could see a repeat of the market reaction to the August 2nd report.
Even after we pass the jobs report, liquidity factors are unlikely to be favorable in September. This is due to the September 15 tax deadline and the likely increase in quarter-end repo activity. Over the past few months, SOFR volume and reserve balances have declined, while margin balance growth has stalled. These factors tend to impact the S&P 500 over time directly. I don’t see any reason to expect a sudden change, suggesting that if outflows are anticipated this month—potentially resembling April—this time will not be any different.
In addition to the U.S. data we’re expecting this week, there will also be a Bank of Canada Monetary Policy meeting. Expectations are for one rate cut, with slight odds for two. Additionally, the USDCAD has seen a significant move; technically, the dollar is oversold against the Canadian dollar. I’ve been expecting it to bounce on two prior occasions over the last 2 or 3 weeks, but the USDCAD appears to be consolidating. We know about the solid inverse relationship between the USDCAD and the S&P 500, and this seems like a good opportunity for the dollar to gain some strength. Remember, currencies are always relative, and it’s entirely possible to get bad U.S. data and still see the dollar strengthen if the outlook in Canada is worse.
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Perhaps Nvidia will give us a clue as to what happens next. The stock moved down to support at $118.25 and consolidated there for most of Friday. If it breaks below the $118 level, it could set up a potential drop back to $110.
Additionally, at the start of the week, the gamma level at $120 will serve as resistance and could cap any rally in the stock. If the stock moves above $120, the next significant gamma level would be around $125.
Anyway, see you 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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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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