November 8, 2021

Stocks – PYPL, AMZN, AMD

Macro – SPY, VIX, AUDJPY

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MICHAEL KRAMER OWNS SPY PUTS

Stocks did a lot of nothing today, with the S&P 500 finishing the day higher by nine bps. That is two doji’s in a row; I guess there is a lot of indecision up here. Given that the index has rallied in a straight line higher since the middle of October, there should be.

I have pointed out the potential train wreck in the making building over the past couple of days. It seems that finally, all of the ingredients are now in place for a take ’em down Tuesday.

Additionally, at least throughout this year, two consecutive days of “indecision” have been associated with short-term peaks in the market.

Also, a late-day move lower brought the S&P 500 below the lower trend line of the symmetrical triangle pattern. An indication the index is due to drop some, I still think 4,540s on the table.

Risk

Meanwhile, our risk-off indicator, the AUDJPY FX cross, traded sideways today, and the currency looks as if it is ready to take its next leg lower.

Implied Vol.

Finally, the VIX, VXN, and VVIX traded higher today as implied volatility rises. It doesn’t matter to me why they are rising, put buying, or excessive call volume. In the end, the outcome may very well be the same; stocks should trade lower. If the VIX is rising on call volumes, it is an even worse sign of things to come because once implied volatility gets too high, all that call volume will disappear, which means market makers will need to unwind their hedges by selling stock. Pick your poison.

PayPal (PYPL)

PayPal is rising after reporting quarterly results that weren’t too impressive. The company also said people would be able to use Venmo on Amazon. The stock has been pounded, and when companies provide weak guidance and are growth companies, they tend to go down. That is just how it is supposed to work. The stock dropping to roughly $210 seems like a very real possibility.

Amazon (AMZN)

I guess now there are no more questions about whether Amazon will fill the gap at $3575 because it was filled today. I still fully expect this stock to be dead money for some time to come and for the shares to drop back to $3300.

AMD (AMD)

AMD joined gammamania today, jumping by 10%. Nothing more, nothing less. Maybe it goes to $160 before the unwind begins.

-Mike

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