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Markets moved a bit higher, with the S&P 500 closing the gap at 4,300. The RSI is now beyond 72 and is very overbought. With the gap filled, resistance should be strong here. This has been a momentum-driven rally, but the market dynamics start to change for the balance of this week, with a VIX expiration on Wednesday morning and Fed minutes Wednesday afternoon, and options expiration come Friday. There will be a lot of gamma released this week, meaning that market markers will no longer have to buy S&P 500 futures to hedge their books.
Additionally, the dollar index had a significant rise today, rising significantly against the Chinese Yuan. The dollar appears to be heading much higher, with the Chinese economy slowing and the PBOC bank cutting rates overnight.
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Additionally, the LQD corporate bond ETF fell today by roughly seven basis points but, more importantly, has stalled out and stopped rising. This last leg higher in the S&P 500 has not been in agreement with the LQD.
Additionally, the TIP ETF remains stalled out and suggests that the move higher in equity price is not likely to last. It isn’t so much the distance of the spread between the two that matters, but it is the direction that matters, and right now, it is clear they are heading in the opposite directions, and that is where many people will get this wrong.
Also the VIX was up today a little bit, something you don’t often see on an up day in S&P 500. Again, something worth watching over the next day or two.
I still think we see 3,950 on the SPX over the next couple of weeks.
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.