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4/18/24
#Stocks – $NFLX
#Macro – $SPX, $NDX, #TGA
Mike’s Reading The Markets Macro Subscription Service on Seeking Alpha
Stocks finished the day lower for a fifth straight day, with the S&P 500 down by 25 bps to close at 5,011. Tomorrow is OPEX, and with the passing of OPEX, we will see gamma levels unclench and the stickiness we have seen in the S&P 500 at the 5,000 level release. A good portion of that gamma will likely be released at the opening tomorrow, with monthly OPEX set to expire. However, 0DTE options continue trading until the end of the day.
It has been an observable and easy pattern to see how the index tends to either gap higher or move sharply higher right out of the opening and then tends to fade the rest of the day, starting mid-morning. You have to wonder at what point the market stops getting bid up in the morning, and traders just start selling from the start.
As Gammalabs shows, CTAs are now sellers of the S&P 500, and this is one reason why we are seeing the early buying met by that end-of-day wave of selling.
(Gammalabs)
Additionally, as Gammalabs shows, the S&P 500 is also in net negative gamma, which means that the market makers are not buying the dipping but following the selling CTAs are doing. In negative gamma regimes, market makers follow the trend; in positive gamma, they are sellers of strengths and buyers of weakness.
(Gammalabs)
We already knew liquidity was dropping, as noted by changes in the TGA and book depth of the e-minis, but today, the Fed balance sheet shows that reserve balances fell to $3.33 trillion from $3.61 trillion last week, or nearly $300 billion in one week. In April 2022, we saw reserves fall about $400 billion, which resulted in a very bad stretch for the market. This was the biggest move lower in reserves since then.
15:45
Defined Terms and Jargon:
• Baltic Dry Index (BDI): A measure of shipping rates for raw materials, often viewed as an indicator of global economic activity.
• Inverse Head and Shoulders Pattern: A bullish technical chart pattern indicating a potential reversal of a downtrend into an uptrend.
• Diamond Reversal Pattern: A technical chart formation indicating a potential trend reversal, characterized by price movements forming a diamond shape.
• QE (Quantitative Easing): A monetary policy where central banks purchase assets to inject liquidity into the economy, generally lowering interest rates and weakening currency.
• Rare Earth Metals: A group of chemically similar metallic elements crucial for advanced technological and industrial applications, including electronics and defense.
• Inflation Swaps: Financial instruments used by investors to speculate on or hedge against future inflation expectations.
• Control Group (Retail Sales): A subset of retail sales data that excludes volatile components and provides a clearer view of consumer spending trends.
• HGX (Philadelphia Housing Sector Index): An index tracking performance of housing-related stocks including home builders and commodity producers.
• Implied Volatility Dispersion Trade: A market strategy involving options, exploiting differences in volatility between an index and its individual components.
• Correlation Index: An indicator measuring how closely individual stocks move together, used for gauging market risk and sentiment.
Please remember to leave questions in the comments. I’ll be back later. Bye.
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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9:07
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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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11:40
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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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Additionally, we saw rates move higher today, and the dollar strengthened, which again is working to tigthen financial conditions in the background. At this point, we now have liquidity flows, systematic flows, and options flows working against the market. It is a period where liquidity, fundamentals, and flows all come together simultaneously, and they aren’t in favor of stocks going higher.
Netflix (NFLX)
Meanwhile, Netflix reported great subscriber additions, but the market did not care, with the stock still trading down by almost 5%. Revenue guidance for the second quarter and the full year was a bit weak, and their free cash flow for the full year was below estimates, despite the company not changing it. Additionally, the company said starting 1Q’25 will no longer report quarterly membership numbers. Which kind of makes you wonder why? Membership growth has been a significant driver of the stock price, and the first thought is that the company doesn’t want investors to perhaps focus on slowing membership growth.
Meanwhile, the stock is trading at $582, which is an important support level that dates back to July 2020. It is also quite possible that it breaks an uptrend, which is the basis for a rising wedge pattern. If that $580 region of support breaks, the next target could be that gap fill around $493.
-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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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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