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Stocks Rises, VIX Rise, and Yields Rise On September 12, 2022

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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9/12/22

STOCKS – AAPL, SBUX, AMD

MACRO – SPY, VIX, TIP

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Stocks finished the day higher, with the systematic flows continuing to dominate in an illiquid market. The depth of the book on the S&P 500 futures has vanished over the past few days, allowing this market to move much more than what we have seen in recent weeks.

This allows systematic flows to dominate the market and push it around. The options market positioning suggests this market is overextended, and some cracks are starting to show in its stability. The VIX was higher today by about 5% and closed right around 24. The S&P 500 was higher by about1%. The index managed to complete around 4,110 while hitting a high of 4,125. There are plenty of good Fibonacci levels at 4,125 that could offer resistance to the market and keep it from advancing. But at the same time tomorrow’s CPI report will play a much more significant role in what happens.

VIX (VIX)

Meanwhile, the VIX was higher today, and the only explanation for such a thing were systematic flows overriding the options force that normal kicking in when implied volatility is rising, which work to push stocks lower. So either the systematic flows were covering up concerns the market has around the CPI, or the market will have implied volatility to burn up following tomorrow’s CPI report, helping to push it higher.

So yes, a weaker-than-expected CPI print can push the S&P 500 higher to 4,200, taking it back to where the market was at Jackson Hole. But the Fed isn’t likely going to like that.

TIP (TIP)

The TIP ETF was crushed today following a very weak 10-yr auction. The TIP made another new cycle low today, and the spread between the NASDAQ and the 10-yr real yield grows wider. I can tell you when this happened in the past, it hasn’t ended well for the QQQ.

Apple (AAPL)

Apple was very strong today, as there has been some positive news regarding pre-orders for the new iPhone 14. The stock rose to around $163.50 which helped to fill a technical gap. There is a bit of a downtrend in the stock, and typically once a stock fills the gap, it resumes the trend. So if shares were to reverse and move lower over the next couple of days, it wouldn’t be surprising.

Starbucks (SBUX)

Starbucks is also very close to filling a gap at 91.50. This is similar to Apple, with a stock in a downtrend and the potential for the stock to return to that downtrend once the gap is filled.

AMD (AMD)

Finally, AMD filled its gap the other day and had a pretty weak day despite a strong broader market. It could be a good indicator of where Apple, Starbucks, and the rest of the market go from here.

Have a good evening.

-Mike

Charts used with the permission of Bloomberg Finance LP. 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.