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Most of the trading session made sense, with the index gapping lower and then spending most of the day grinding higher as puts were closed and implied volatility fell. The final 20 minutes were something different, which goes to show the effect, or for that matter, what happens when liquidity is absent. The top of the book in the futures is non-existent, and in essence, it doesn’t take very much to move the market.
So when you get about $3 billion to buy on the market on close due to month-end rebalancing, we get these outsized end-of-day moves.
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It was able to drive the S&P 500 roughly 1% higher in the final 20 minutes of trading, helping the index finish up about 15 basis points on the day after it had been down nearly 2% earlier in the morning.
It tough to say where the end of day leaves things, given how odd it was, and with earnings and conference calls after hours, and loads of economic data to continue coming out in the days ahead, tough to look at the final 20 minutes of trading with anything other than a it was something mechanical in nature.
As for the earnings, Meta reported results that came in better than expected and gave revenue guidance that appears to be basically in line with expectations. So it a bit surprising to me see the stock trading higher, especially given how high IV was heading into and how bullishly the stock was positioned. I guess what I’m saying is that I wouldn’t be surprised to see the gains given back, but at least at present, the shares are trading higher around $575.
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Microsoft reported strong earnings that were better than expected, with strong growth in Azure, and also provided solid-looking guidance. So, seeing the shares trade higher makes sense.
In other news, the Bank of Japan meeting is tonight. The bank is expected to cut its GDP growth outlook, but the recent message has been clear: if inflation continues to evolve as anticipated, the bank is likely to continue raising rates. At this point, we continue to wait and see if USDJPY can break below the 140 level.
That’s going to be all for today
-Mike
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Top-of-book:
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The best available bid and ask prices in an order book. It represents the highest bid price and the lowest ask price, indicating the immediate liquidity available for trading at any given moment.
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Liquidity Absence (or Absent Liquidity):
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A condition where there are insufficient orders in the market, leading to limited or no immediate availability for executing trades. In such conditions, small orders can cause significant price movements.
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Grinding Higher:
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A market scenario in which prices move gradually upward, typically reflecting persistent buying or the unwinding of bearish positions, rather than rapid or sharp price spikes.
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Gapping Lower:
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A situation where the price of an asset opens significantly lower than the previous day’s closing price, creating a visible gap on price charts. This typically occurs due to market-moving news or overnight developments.
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Closing Puts (Put Option Closures):
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The act of traders exiting put options (options that profit when asset prices decline). Closing put positions can lead to upward price pressure, as market makers reduce short hedges that were initially established against those puts.
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Implied Volatility (IV):
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A metric representing the market’s expectation of the future volatility of an asset’s price, implied from options prices. Falling IV usually indicates decreasing uncertainty or fear in the market.
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Basis Points (bps):
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A measurement unit equal to 0.01%, commonly used to describe small changes in financial instruments or interest rates. For instance, 15 bps means 0.15%.
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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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