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2/11/24
#Stocks – $NVDA
#Macro – $SPX, $VIX, #RATES
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It was a mixed day of trading as rising implied volatility appeared to finally reach a level that was determinantal for stocks to continue to push higher. You won’t see it on the VIX index, but you will see it when looking at an at-the-money 1-month Nvidia option that climbed to 61.7% today.
It is a sight to behold, as it is not something you see like this often. That rising IV in sync with the rising stock price is about as clear a sign as any as to what is happening with Nvidia’s stock, which is a frenzy and demand of call buying lifting the shares higher, and as a result the broader indexes with it.
The move higher in IV of the stocks in the MAG7 and the S&P 500 got the Implied Correlations indexes higher for 1,3,9, and 12 months.
The entire implied volatility term structure moved higher today, with the biggest moves higher coming from the front of the curve, likely due to some hedging activity for the CPI report tomorrow. It seems likely that IV should fall tomorrow once the CPI data is released unless there is a reason for implied volatility to rise following the report, which will depend on the data itself.
Today, we finally saw the rising wedge break, with an initial throwover that turned lower through the lower bound. If it is a rising wedge that has officially broken, then we should see follow-through tomorrow and in the coming days, taking the S&P 500 back to the origin for the rising wedge to 4,850. After that, we will have to see what happens.
The 10-year rate has not broken up and out, but I think tomorrow’s data and the data to follow the rest of the week will likely result in the 10-year either breaking out and moving sharply higher or moving back towards the 3.8% region. The thing is that rates have a few chances to move lower, including a solid 10-year auction last week and favorable CPI revisions, but we haven’t seen rates move down either. So, my feeling is that bias is for rates to rise.
I will be back tomorrow with more.
-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.