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Stocks finished higher, but they were well off their highs. Just as yesterday saw a significant move higher in the final 30 minutes, today featured a sharp decline in the final 10 minutes, not driven by a notable market-on-close imbalance. I’d attribute the late-day selling to panic hedging ahead of Apple and Amazon’s earnings, as well as tomorrow’s jobs report.
Not surprisingly, with the job report tomorrow, the VIX 1-day moved up to 27.5.
The 1-month implied correlation index was also higher today, signaling that something wasn’t quite right with the market. Now, with earnings season essentially concluded following Apple’s report, we should see the implied correlation index continue to rise as the volatility dispersion between the index and individual stocks unwinds. Typically, when the correlation index moves higher, the S&P 500 moves lower.
Also, a few notable points from today’s trading session: technically, the S&P 500 reached the 61.8% retracement level but failed to break through, potentially forming a shooting star reversal candle.
It was the same story for the NASDAQ 100, which also hit the 61.8% retracement level and reversed, suggesting this could be an ideal point for the current leg of the rebound to conclude.
If you wanted, you could interpret this as three waves down, followed by three waves up. That would imply there’s still one more major wave down ahead, potentially undercutting the lows set in early April.
The problem, of course, is that we get the job report tomorrow. Kalshi is predicting an unemployment rate of 4.3%, which is higher than the estimated rate of 4.2%. Additionally, Kalshi predicts that 129,000 jobs have been created, in line with estimates of 130,000. So what happens tomorrow is mainly going to determine what happens next. It would take a bad number to get the market moving lower, and we haven’t had many of those, so it’s tough to say.
Anyway, see you Sunday.
Mike
Terms From ChatGPT:
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Market-on-close imbalance:
Refers to a significant mismatch between buy and sell orders at the market close, often resulting in sharp moves in price just before the end of trading.
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Panic hedging:
Rapid and urgent protective trading activity, usually buying puts or shorting futures, aimed at limiting exposure to anticipated volatility, such as before major economic reports or earnings announcements.
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Implied correlation index:
Measures how closely stocks within an index are expected to move together in the future. A higher implied correlation indicates investors anticipate stocks will move in sync, usually associated with broader market declines.
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Volatility dispersion:
A strategy exploiting differences between implied volatility of an index and its constituent stocks, typically involving shorting index volatility and buying volatility in individual stocks, expecting a divergence or convergence.
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61.8% retracement:
A key Fibonacci retracement level commonly used in technical analysis to predict where a price correction or reversal might occur after a significant move.
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Shooting star reversal candle:
A single-candle bearish reversal pattern characterized by a small body, little or no lower shadow, and a long upper shadow, suggesting rejection at higher price levels and potential reversal downward.
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Three-wave pattern:
Part of Elliott Wave analysis, where market movements are divided into distinct waves. A “three-wave” movement typically signals corrective or counter-trend action rather than the dominant trend.
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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