Well, settlement Tuesday delivered once again, with the S&P 500 falling by 21 bps on the day. The move lower was mild by comparison, with the count now 24 out of 36 settlement days trading lower. This will next be an issue on Thursday, potentially for the market.
The software sector fell by more than 2% on the day, and apparently was the market’s preferred source of funds. The stats are pretty brutal. The IGV was rising on 10 out of 36 settlements with a cumulative decline of more than 30%.
As for moving forward, the S&P 500 has been battling at the 6,800 level for some time, and that remains the battleground, except that 6,800 is no longer support and instead resistance. The 10-day exponential average is also trending lower, and the RSI is trending lower as well, which is not a bullish indication at the moment.
6,800 is also an important area of resistance, as well, from a gamma point, with the bigger gamma now at 6,700.
The only thing that stands out is that implied volatility is still very high, and the spread between 1-month realized vol and implied vol is very wide. So, unless we see market volatility pick up, there is a good chance implied volatility will come down. Of course, the only problem is that we have no idea what the headlines will be and what oil will do.
Finally, Oracle (ORCL) reported results, and their CapEx and free cash flow are not a pretty picture. I know the stock was trading higher after hours, but that was a fairly obvious setup given how the more than 100% IV and heavy put positioning.
With lots of put delta positions at $180 and higher for this week’s and next week’s expiration.
But I mean, wow, assuming my math is right, on a trailing-twelve-month basis, Oracle’s Free Cash Flow is a negative $24 billion, with CapEx rising to more than $48 billion over the same time. Forget about the stock; I’ll watch CDS trading tomorrow to see whether the credit market is bullish.
Comments
Log in or sign up to join the conversation.