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8/15/24
#Stocks:
#Macro: #RATES, $USDJPY, $USDCAD, $SPX
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- Stocks Rally Ahead Of CPI
- RTM: Market Is Bracing For Data
- RTM: Consolidation Phase Almost Over?
- RTM: Shockwaves
Stocks kept increasing because retail sales and jobless claims data were better than expected. This is the second week in a row that stocks have jumped after a good jobless claims report. But I’m unsure if that’s a good thing because jobless claims data is unpredictable and comes out every week. At some point, it might be worse than expected. If that happens, will stocks take a hit? Just something to think about.
It’s hard to say how much of the recent market rise is due to options expiring tomorrow. The VIX, which measures market volatility, has dropped a lot, which suggests that many investors closed puts, their bets against the market. This forced market makers to undo their bearish positions, so part of the market’s rise might be because of this “volatility crush.”
Another reason is that the USD/JPY (the exchange rate between the US dollar and the Japanese yen) has stabilized recently. It even went up today and returned to its 20-day moving average.
Another thing to watch is the USDCAD (the exchange rate between the US dollar and the Canadian dollar), which has gone up over the last few days. We often see that when the USDCAD hits a low, the S&P 500 tends to peak, and the opposite is true, too. So, it’s essential to keep an eye on whether the USDCAD keeps rising. The critical level it hasn’t been able to break through is around 1.385, except for one time in December. If the USDCAD keeps climbing one would things the S&P 500 turns lower.
We’ve also noticed that the USDMXN (the exchange rate between the US dollar and the Mexican peso) has dropped back down to its support level and the 20-day moving average after a big jump up. A move up in the USDMXN is a risk-off gauge; if the USDMXN continues to fall, it is a risk-on indication.
The price movement in the last few days has been pretty interesting, to say the least. Trading volume has been really low, and the difference between bid and offer prices has been quite wide.
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The 1-month implied correlation index is back down to 12, which is at the lower end of its usual range. The extreme levels we saw in July were just that—extremes. In the past, like in 2017 and 2018, the lows were around 8 or 9, and in 2023, it was around 10.
This seems like a dangerous market that, if some of the reliable indicators and suggestions are correct, could be nearly burning itself out already.
Mike
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.