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12/12/23
#Stocks – $AVGO
#Macro – $SPX, $NDX, #Highyield
Mike’s Reading The Markets Macro Subscription Service on Seeking Alpha
- RTM: From Mega To Value
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Stocks managed to rise today, as the pinning of volatility resulted in the VIX falling below 12 for part of the day. Unfortunately, with options expiring this Friday and the VIX Option expiring next week, the mechanical forces in the market are at play right now.
Today, the S&P 500 crossed the upper Bollinger band while the RSI moved above 70. Again, I use both signals to trigger overbought or oversold conditions. It doesn’t have to mean that we trade lower, but it could very well mean that we consolidate sideways.
The NDX also traded above its upper Bollinger band today, and the RSI suggests this index is also overbought and due to either drop or consolidate sideways.
I am just pointing out the condition and what I have observed from my past experiences.
Interestingly, today, we saw credit spreads narrow to 392 on the CDX High Yield Index. This is putting it on a path that is troublesome from the Fed’s standpoint because this index is about the closest thing I have found to a real-time financial conditions index, and when it is falling, it is a sign of a lot of easing. So we are about to see either the greatest collapse in the financial conditions ever or a big reversal.
It also seems to track changes in the S&P 500 earnings yield closely and even serves as a leading indicator. So, if credit spreads widen, the S&P 500 earnings yield will rise, and the S&P 500 will fall. When credit spreads narrow, the earnings yields fall, meaning stock prices rise.
Maybe it is by chance, or maybe it’s not the day before the December FOMC meeting. Still, the CDX High Yield index also appears to have hit or come very close to hitting the lower Bollinger band. At the same time, it has also seen its RSI drop below 30, suggesting that the CDX index is either due to rally or to consolidate sideways.
It seems like Broadcom has replaced Nvidia as the hyperbolic stock in the market. It appears to be a gamma squeeze. It has the makings of one all over the place. Call IV rising above Put IV, call volume exploding. What is perplexing is how or why; I didn’t even think the results were that good. But hey, fundamentals do not matter when it comes to a gamma squeeze.
-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.
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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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