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The S&P 500 finished the day lower by about 34 basis points. The index now appears to be forming a potential reversal 2b top after attempting to break out to a new high. Instead, it reversed lower and closed the session back near support at 6,920.
A failure to push through the 6,950 area, followed by a drop below 6,920, would open a path toward 6,835. More importantly, the index has done very little since late October, and such a move would also put it at risk of breaking the uptrend that formed off the November 21 lows. As a result, the index is in a more vulnerable position than it may appear at first glance.
BTIC S&P 500 Total Return Futures (EFFR) finished lower again today for the December 2026 contracts, at their lowest level since March 2024. While some may view this as bullish because financing costs are falling, one would have difficulty finding a time when the S&P 500 has risen, as these futures contracts were falling. At least that is what I have observed. This, to me, is outright bearish and a sign that demand for leverage is slipping or positions are being closed.
Implied volatility rose today ahead of Friday’s jobs report and the Supreme Court’s opinion releases, which may include a decision on tariffs. Kalshi assigns a 30% probability that the Court rules in favor of the tariffs, implying a 70% chance they are struck down.
I would expect implied volatility to continue rising into this news event. The VIX 1-day is likely to be materially higher by Thursday afternoon and may even continue to rise after the jobs report, since the Court’s rulings are expected later in the day. A VIX 1-day reading in the 15 to 20 range seems highly likely, in my view.
-Mike
Glossary by ChatGPT
Basis Points – A unit of measurement equal to one hundredth of a percentage point, commonly used to describe small changes in prices or yields.
BTIC (Basis Trade at Index Close) – A futures transaction priced relative to the official closing value of an index, reflecting financing and positioning dynamics.
Implied Volatility – The market’s expectation of future price fluctuations derived from option prices.
Reversal 2B Top – A technical pattern where price briefly breaks to a new high before reversing lower, signaling potential trend exhaustion.
VIX 1-Day – A volatility measure reflecting expected S&P 500 price movement over the next trading day.
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.
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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.