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Stocks May Have Even Further To Drop, With More Rate Volatility To Come

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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#Stocks – $META

#Macro – $SPX, #rates

Mike’s Reading The Markets Macro Subscription Service on Seeking Alpha

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Stocks fell sharply today as rates pushed back toward their highs. There was a 5-year Treasury auction today that did not go well, and that just pushed rates even higher after 1 p.m. Tomorrow, there will be a 7-year auction at 1 p.m., and it too could be a market-moving event and needs to be paid attention to.

Tomorrow, we will also get that highly anticipated 3Q GDP and the estimate is for 4.5%. The Atlanta Fed GDPNow and Bloomberg Economics suggest a number greater than 5%. Even if the number comes in around 4.5%, it is almost hard to believe, given the 2.1% print in 2Q. That would be a big acceleration in the economy. That will be a closely watched number as it will greatly impact rates.

Tomorrow could be an active day for the rate complex between the GDP numbers in the morning and the 7-year Treasury auction. There will also be an ECB rate announcement tomorrow as well in the morning.

S&P 500 (SPX)

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Meanwhile, the S&P 500 closed today at 4,186, meaning the entire summer rally is gone. We are returning to levels on May 31, when the S&P 500 closed at 4,179. To make matters worse, we tested that 200-day moving average the last few days, and today, we moved firmly below it after it worked as resistance.

The decline in the S&P 500 doesn’t look complete yet, and I wouldn’t be surprised to see 4,115 in the days ahead based on the wave counts.

Meta (META)

I don’t think Meta will save the day; the share fell today by 4% from $312.55 to $299.53. The company beat on the top and the bottom but then issued guidance of $36.5 billion to $40 billion, or $38.25 billion at the mid-point, which was light of estimates for $38.76 billion. So, it missed on guidance by a bit. Despite the beat and inline guide, the stock is up less than 2% as of 5:30 ET and is trading around $305, so it is still below where it closed yesterday. Not very encouraging.

But the bigger problem for Meta is that there is a lot of call gamma sitting up $315, and put gamma, for that matter, which expires on Friday. So unless Meta can get above $315, all of that call gamma will start to lose a lot of value as implied volatility begins to melt, which means market makers will likely be sellers of Meta tomorrow.


So if the stocks trade down tomorrow, despite the “fantastic, groundbreaking results, lead by generative AI,” as noted on TV multiple times, you know why.

I did talk about this today in the mid-day write-up for subs. (See: Stocks Are On The Cusp Of A Significant Breakdown)



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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