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Subscribe →The S&P 500 fell by roughly 50 bps on the day as oil, the dollar, and rates rose. This is the regime we were seeing in late March and early April. Whether this persists will depend on whether oil continues to rise and whether higher oil and gasoline prices create an inflationary impulse.
Tomorrow is the FOMC meeting, and we will get earnings from four of the Mag 7. The dispersion trade—and the index—are living on borrowed time. The dispersion index fell today, closing below 40, while implied correlation rose, resulting in a compression of the spread between the two. As dispersion begins to unwind, this spread should compress further, and as it does, the S&P 500 should move lower along with it.
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Finally, tonight, I just wanted to note that the fate of the 1966 analog rests on what transpires over the next few trading days. The chart suggests a turn lower is due, and that should mark the beginning of something more severe than what we have experienced so far. The recent move higher was greater than the analog suggested, but again, this is more so about the twists and turns, not necessarily the levels.
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Glossary by ChatGPT
- Basis Points (bps): A unit of measurement equal to one-hundredth of a percentage point, used to describe changes in interest rates or market moves.
- Dispersion Trade: An options strategy that profits from differences in volatility between individual stocks and an index.
- FOMC (Federal Open Market Committee): The Federal Reserve body responsible for setting U.S. monetary policy, including interest rates.
- Implied Correlation: A measure derived from options prices indicating how much individual stocks are expected to move in relation to each other.
- Inflationary Impulse: A force or development that contributes to rising prices across the economy.
- Mag 7: Refers to seven large-cap technology companies that have significant influence on major equity indices.
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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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