I shared this video with members of my SA Marketplace service RTM yesterday. I hope it helps explain a few things going on from my viewpoint.
So it turns out that Wednesday was just a Vanna squeeze, with implied volatility dropping sharply, ramping up stock prices. The VIX started falling at 2:02 and never looked back. That’s over now.
The S&P 500 futures have an interesting tale of their own. At one point yesterday, they traded at just a touch above their previous intraday high, hitting 4743.25, versus the high on Nov. 22 of 4740.50. It was all downhill from there.
The S&P 500 fell just over 2% from intraday high to low.
It gets better because the NASDAQ 100 futures traded to a high of 16,457 yesterday, and just above that 16,445 level we have been using as resistance since Nov. 25. It was straight down from there too. The NASDAQ 100 fell about 4% from the intraday high to the intraday low.
Very strange price action.
Today will be another exciting day with S&P 500 options expiring on the open along with stocks on the close. Maybe the market makers will try to get the S&P 500 back up towards 4,700 to salvage that strike price. But once that gamma comes off the board today, I think you will see more of yesterday’s actions. As I have said for months reducing QE is tightening because financial conditions tighten. I track a number of spreads used in the Chicago Fed National Financial Conditions Index, and based on that, tightening has continued this week.
Apple
Apple (NASDAQ:AAPL) fell sharply, giving back all of its gains from Wednesday, and has a lot of gaps to fill at lower levels. I love Apple, I own it, but this thing needs to come back to around $165. It is just way overbought, and the gamma squeeze has lived its life, but it’s over now.
NVIDIA
I think NVIDIA (NASDAQ:NVDA) is in the same place as Apple, with a gamma squeeze that took it higher and now needs to deflate, with $265 being its support.
Anyway, that’s all