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STOCKS – ARKK
MACRO – SPY, QQQ, TIP, DXY, VIX, VVIX
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Stocks finished the day higher, with the S&P 500 rising 1.5%. The equity market rallied due to a move lower in the VIX and implied volatility. Rates were up, the dollar was up again, and more importantly, the TIP ETF was very close to making a new closing low. These are not bullish signals.
The VIX finished the day right around 26 and seemed to be positioned perfectly at this point to spike higher. Options deltas in the SPX and the QQQ ETF were negative, suggesting put buying and call selling. The VIX didn’t reflect that, giving markets a false sense heading into a reasonably critical employment report, especially on the wages side.
Despite the decline in the VIX, the VVIX finished the day flat and continues to be at very low levels. An indication of a form of complacency, in my opinion.
The S&P 500 is back to the 3,900 level and resistance, where the index failed last week. So, if the index is going to make a run to fill the gap around 4,020, it will need to gap higher tomorrow and go. Otherwise, there is a good chance the S&P 500 will set up a double top and a revisit of the lows.
So you can see how the market is positioned from a rate, volatility, and index standpoint. Get a hot number, rates and volatility probably move up, and stocks move down. Get a weaker number, rates and volatility probably move down, and stocks go up.
Given the negative deltas in the SPX and QQQ, I think the market is setting up to move lower. Additionally, next week we get the CPI report, which could bring plenty of hedging activity into the mix, another reason for the VIX to hold this 25-26 region and move higher.
The ARKK ETF can also hint following the jobs report, as it closed on resistance at 46.85. Again, a gap above that resistance setups a move up to around $53. If not, probably back to the lows.
We will have to see what happens tomorrow before making any other conclusions.
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. 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.