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Volatility Fades but Liquidity Concerns Persist

March 9, 2026

Stocks fell sharply at the open but, as expected, snapped back throughout the day as volatility eased. The market got an extra bit of juice later in the day on headlines that the war may be over soon.

The primary problem from a bullish standpoint is that tomorrow is a settlement date of roughly $15 billion in T-bills. The stats suggest there is about a one-third chance the market rises tomorrow, while two-thirds of the time it is down on settlement dates.

It could be one of those days, I guess, where volatility overrides the settlement date, and we see a modest gain of 40 or 50 bps, but again, the analysis has held up fairly well.

From both an options and technical perspective, 6,800 is again an important level because once you get over it, the index could easily return to 6,900, which is the zero gamma level.

The other issue, of course, is that the USD/JPY cross-currency basis has been moving more negative, suggesting tighter dollar liquidity conditions. This is in addition to the Treasury settlement data. So the liquidity picture, as of right now, hasn’t really changed, and in some respects it may actually be a bit worse.

Again, the cross-currency basis could widen if there is a sense that oil prices are going to stabilize or move lower, but as of right now, I don’t think anybody can really say.

Oil was obviously overbought, trading above its upper Bollinger Band with an RSI above 70, and support around the $80 mark seems fairly firm. So it could fall further, but I don’t think it will be in the $60s again anytime soon.

$80 oil is better than $100 oil, but still worse than $60, and a $20 increase in oil is still more than a 33% rise, which is not going to look good in the upcoming CPI report or at the gas station.

-Mike

Glossary by ChatGPT

Bollinger Bands — A technical analysis indicator using standard deviations around a moving average to measure volatility and potential overbought or oversold conditions.

Cross-Currency Basis — The spread between borrowing costs in different currencies in the swap market, often used as a measure of dollar funding stress or liquidity conditions.

RSI (Relative Strength Index) — A momentum oscillator that measures the speed and magnitude of price movements to identify overbought or oversold conditions.

Settlement Date — The date when a financial transaction, such as a Treasury auction or trade, is finalized and funds or securities are exchanged.

T-Bills (Treasury Bills) — Short-term U.S. government debt securities with maturities typically ranging from a few days to one year.

Zero Gamma Level — An options market level where dealer gamma exposure shifts, often influencing market volatility and directional flows.

Disclosure

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