Subscribe to receive this FREE daily commentary directly in your email
October 14, 2021
Stocks – NONE
Macro – SPY, VIX, DXY
Mike’s Reading The Markets (RTM) Premium Content – $45/MONTH OR $400/YEAR
- Short-Covering Really Ahead Of OPEX
- RTM – The Market Maybe Worrying About Growth
- RTM Exclusive – A Stronger Dollar May Sink Freeport McMoran
- RTM: The Stock Market Has Changed In Anticipation Of Fed Taper
- RTM – The Soaring Dollar Is A Stock Market Killer
- Tactical Update: The Market And The Fed May Be Heading For An Epic Showdown
- RTM Exclusive: Lemonade’s Stock Is Still Crazy Expensive And Likely To Fall Further
- RTM Exclusive: Intel’s Stock Is Far From Cheap And May Head Lower
So the market decided today to pull itself together and stage a massive short-covering rally into options expiration tomorrow. This rally would have been more appropriate yesterday given how much the Dollar index pulled back, but instead, they decided to rally it today.
The VIX moved lower, closing at 16.85. The last time the VIX closed below 17 was back on September 2, at 16.40. Interestingly, and more to my point I was trying to make yesterday, in my The Dip Is Dead story, and here on this blog, September 2 also happened to be the day the S&P 500 topped out at 4537. So here we are now at the same spot, essentially, on the VIX, but the S&P 500 is about 100 points lower.
Maybe this isn’t an easy concept to understand, but if the VIX doesn’t start going lower, the S&P 500 will have a tough time rising back to its previous highs. Now could the VIX go to 15 or 13? Sure, it could, but given the unresolved Evergrande situation and increasing uncertainty in earnings estimates, now may not be an ideal time for the VIX to go to 13. Not to mention the VIX index has been steadily trending higher since June.
S&P 500 (SPY)
The S&P 500 rose today by around 1.7%, allowing it to finally refill the gap from September 27 while also again climbing to the 50-day moving average. Meanwhile, today’s move looked almost identical most of the day to the action on October 7, but by the days closed, it looked more like the move on September 23. Both of those days had big moves higher, with massive gaps up, and both moves ended the same with the market refilling the gap at lower prices days later.
Technically speaking, the gap at 4,440 is filled, and it should result in a continuation of the overall trend, which is lower. Additionally, there is now a gap that needs to be filled at 4,360. So since tomorrow is options expiration, and there will be a ton of gamma expiring for the indexes on the opening, there could be a very big gamma hangover. Not to mention if you think the market has been volatile now, just wait.
The other part of the equation is that the S&P 500 has been tracking the dollar very closely, which was crushed yesterday. Today the dollar was flat but managed to finish well off of its lows, just below 94. Since Jackson Hole, the dollar and the S&P 500 have been tight, so again, watch the dollar index; if it starts rising again, the rally in stocks will stall out.
Anyway, that’s it for today. I didn’t pay close enough attention to the market today to focus on individual stocks.
Mike
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future result.
Subscribe to receive this FREE daily commentary directly in your email
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.
Volatile Week Ahead With Fed And September OPEX
Mott Capital's Market Chronicles September 12, 2025 2:14 PM