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5/21/24
#Stocks: $NVDA
#Macro: $SPX, $VIX
Mike’s Reading The Markets Macro Subscription Service on Seeking Alpha
- RTM: Nvidia Positioning Update
- RTM: Trends Remain In Place
- RTM: Nvidia Is Very Important To The S&P 500 Earnings Growth Story
- RTM: IV Crush Helps Lift Stocks Ahead Of OPEX
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The market seems dead today, with trading volumes down and price action stalled out since the CPI report last week. One would think things will start to loosen up tomorrow because the pinning in the VIX should be passed, and the Fed minutes at 2 PM ET should help give the markets something to think about. Chris Waller gave the market plenty to think about today when he discussed delaying rate cuts to later this year or the start of next year. He then gave a preview of Friday’s speech, mentioning that the neutral rate may be higher than previously thought.
When you listen to all of these Fed speakers, they seem to be pointing to a June preview of the dot plot, which will probably see the median move to only one cut in 2024 and the longer-run rate move higher. It will also probably mean fewer cuts in 2025.
Meanwhile, the VIX1D and the VIX 30-day were down today, but I’d imagine if there was a VIX 2-Day, it would show that implied volatility was higher. Fixed strike volatility for the S&P 500 for expiration on May 23 showed that IV was up across the curve and was skewed toward rising S&P 500 prices. This means that the IV rose more from the previous day for prices going higher than prices going lower.
(BLOOMBERG)
The buildup in the S&P 500’s call delta for Thursday easily outweighs the put delta, so the market is not surprisingly positioned bullishly ahead of Nvidia’s earnings report. So I would expect that as IV comes down, instead of the puts being crushed, pushing the market higher, the calls will be crushed, pushing the market lower. Now, of course, if Nvidia reports amazing results and beats by a huge amount, and then pushes guidance even higher than expectations, and maybe announces a 10-for-1 stock split, the market bets on more upside will probably pay off. But there is no way to handicap what Nvidia’s results or guidance will be.
(BLOOMBERG)
Overall, this seems to suggest that the market stalemate will break sometime tomorrow late in the day, with very high odds of it breaking on Thursday, with some kind of big move, either up or down. Given how low implied volatility is overall across the curve, a big move in the broader markets could come as a big surprise, especially if it is to the downside.
-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.