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The S&P 500 finished the day lower by roughly 65 basis points. From a stock market perspective, it was relatively uneventful. However, the FX market told a different story. The yen strengthened by about 80 basis points, and the Swiss franc gained 50 basis points. Most notable was the Taiwan dollar, which appreciated by 5.1% today, following a move of more than 4% on Friday. The Taiwan dollar has strengthened by over 9% in just two days.
When looking at the S&P 500, I still believe it’s well-positioned to give back its recent gains. The rally appears to have been driven more by put option decay and falling implied volatility than by any fundamental catalyst. The index is currently sitting near the 61.8% retracement level, with the 200-day moving average just above at 5,745, and the July 2024 highs nearby at 5,671. This area presents significant technical resistance.
There’s also still the gap from Friday’s opening. Gaps that follow sharp moves lower into the close typically fill relatively quickly, so it wouldn’t be surprising to see that gap filled by Tuesday or Wednesday. Additionally, the gap at 5,289 remains open and could still be targeted.
Meanwhile, the 10-year Treasury rate rose back to 4.35% today, which will be an important level to watch this week. There’s a 10-year auction scheduled for May 6 and a 30-year auction on May 8. The 10-year has consistently struggled to break through the 4.35% to 4.40% range. A breakout above this region could easily push the yield back toward 4.5%.
We’ll see how things unfold tomorrow, as this can change quickly, especially if a headline is taken out of context.
-mike
Terms By ChatGPT
Basis Points (bps)
One basis point equals 0.01%, commonly used to measure changes in interest rates or market moves.
Put Option Decay / Puts Burning
The decline in value of put options as they approach expiration, especially when out-of-the-money.
Implied Volatility
The market’s expectation of future price fluctuations, often reflected in options pricing.
Retracement Level
A technical analysis level based on Fibonacci ratios that suggests where a pullback might reverse.
200-Day Moving Average
A long-term trend indicator that averages the past 200 days of closing prices.
Gap (in price)
An area on a chart where no trading occurred, typically between a previous close and the next open.
Treasury Auction
A scheduled sale of U.S. government debt to investors, which affects interest rates and market liquidity.
Breakout
When a price moves beyond a defined support or resistance level, often triggering more buying or selling.
Headline Risk
The risk that news or headlines (even misunderstood ones) can quickly move markets.
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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