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The S&P 500 finished the day higher by a little more than 50 basis points. It was a typical Monday, following a Friday that saw the VIX 1-day fall to 9.5 from 16.4. After a while, it becomes somewhat nauseating to see the same pattern repeat so regularly. Still, it clearly sends a message: with volatility essentially reset at this point, the index is once again likely to stall.
In other news, the quarterly refunding announcement came in hotter than I expected, based on what I had read, with the second quarter emerging as the surprise. The Treasury now expects to issue $109 billion, assuming a Treasury General Account (TGA) balance of $900 billion. Yes, the TGA target was raised to $900 billion from $850 billion, which is not surprising given the size of the US debt, and again something I frequently highlighted.
Rates were higher for most of the day following the hotter-than-expected ISM manufacturing report, but they took another leg higher after the Treasury’s 3:00 p.m. ET announcement. On Wednesday morning, we will find out how the issuance will be broken down.
The 30-year minus 3-month spread is once again at the upper end of its bull flag pattern. At this point, if the spread can break above the 1.25% level, it could accelerate higher, with potential upside towards 1.7% to 1.75%.
Barring some kind of downside shock, the yield curve would likely continue to steepen through a rise in the 30-year rate.
As noted yesterday, Palantir’s key resistance level from an options positioning standpoint was $160, and that is where the stock stalled in after-hours trading. If the stock cannot clear that level, it would not be surprising to see the gains reversed, with shares moving sharply lower in tomorrow’s trading session.
-Mike
Glossary by ChatGPT
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After-hours trading – Trading activity that occurs after the regular market session has closed, often marked by lower liquidity and higher volatility.
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Basis points – A unit of measurement equal to one hundredth of a percentage point, commonly used to describe changes in interest rates or yields.
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Bull flag – A technical chart pattern indicating consolidation after a strong upward move, often preceding another advance.
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ISM Manufacturing PMI – A monthly survey-based index that measures the health of the U.S. manufacturing sector.
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Options positioning – The distribution of outstanding options contracts that can influence price behavior around key strike levels.
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Quarterly Refunding Announcement – The U.S. Treasury’s regular update outlining expected borrowing needs and debt issuance plans.
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Treasury General Account (TGA) – The U.S. government’s primary checking account held at the Federal Reserve, used to manage cash balances.
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VIX 1-day – A short-term volatility measure reflecting expected equity market volatility over the next trading day.
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Yield curve steepening – A move where long-term interest rates rise faster than short-term rates, increasing the slope of the yield curve.
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Yield spread (30-year minus 3-month) – The difference between long-term and short-term Treasury yields, often used to assess economic and rate cycle dynamics.
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.
Subscribe to receive this FREE daily commentary directly in your email
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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