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It was another turbulent trading session, marked by heightened volatility and a rush to exit US assets. The dollar index dropped roughly 1.1%, the S&P 500 declined by about 3%, and the 10-Year Treasury yield rose by eight basis points. The key question now is how much further this can go—and honestly, I don’t have a definitive answer. What I can say is that the dollar will likely serve as a guide. Stocks probably won’t stop declining until the dollar stabilizes.
Even more specifically, it’s a question of when currencies like the yen and euro stop strengthening. Given where USD/JPY is trading today, the move might still have considerable room, especially since USD/JPY is once again approaching critical support in the 140 to 141 range. If that support breaks, we could see significant further strength in the yen.
It’s the same story with the 30-year Treasury yield, which is likely targeting 5%—and possibly even higher.
Regarding today’s price action, we traded down to 5,100—the put wall—and tested it twice. My sense is that as the day drew to a close and the index was unable to sustain levels below 5,100, we likely saw put positions being closed out.
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That sent implied volatility lower, triggering the end-of-day short-covering rally that helped transform what was nearly a 3.5% loss on the S&P 500 into a more modest 2.4% decline.
Again, I continue to believe we’re currently in wave five down, which could easily carry us well below the lows from April 7. The structure remains consistent, showing sharp, linear impulses lower with very few overlaps. That leaves the path open toward 4,500—though admittedly, a lot would need to align just right for that scenario to play out.
Tomorrow is a new day!
-Mike
Terms By ChatGPT:
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Put Wall:
A significant strike level with a large concentration of open put options, often acting as strong support due to hedging activity by market makers.
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Implied Volatility (IV):
A metric derived from option prices, representing the market’s expectation of future price volatility of the underlying asset.
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Short-Covering Rally:
A rapid increase in price driven primarily by short-sellers buying back shares to close their positions, typically occurring near market bottoms or key support levels.
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Wave 5 (Elliott Wave):
In Elliott Wave theory, wave 5 is the final leg of a five-wave impulse sequence (waves 1–5), indicating the last phase of a trending market movement before a larger corrective phase begins.
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Impulse Wave (Elliott Wave):
A strong, directional move within Elliott Wave theory, characterized by clear, sharp, and non-overlapping price movements, often indicating the dominant direction of the trend.
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Linear Price Action:
Price movements occurring sharply in one direction with minimal retracements or sideways consolidation.
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Overlap (in Elliott Wave analysis):
A situation where price movements within waves intersect or retrace significantly into the territory of previous waves, typically indicating corrective rather than impulsive action.
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.
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