Rates Soar To New Heights

Stocks finished the day higher, climbing by 40 bps. Most of the gains came in the final minutes. It was clear that the 0-DTE crowd was trying to close the index over the 4,330 level, and accomplished their goal. Today’s most active options were the 4,330 and 4,440 calls for today’s expiration. So it seemed pretty obvious what the driver to the late-day surge was. Additionally, the put wall was at $4300, offering a support level early at the start of the trading day.

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The chart clearly shows that the level acted as resistance today, and it took a late-day surge to rescue the call option.

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I do not think much changed today from a technical perspective as the index was barely changed in the longer-term time frame and most likely serves as a pause day.

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10-Yr Rate

The 10-yr rate rose sharply today, ten bps, a new high for the cycle. At this point, the next level of resistance comes around 4.7%.

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20Yr + Bond ETF (TLT)

Meanwhile, the 30-year was up 13 bps on the day and closed at 4.66%, which drove the TLT down by 2.5% to close at $89.18. The ETF is coming up on an big level of support at $87.40. It could go lower from a technical standpoint, but I think that $87.40 would at least in the short term, offer a pretty healthy level of support to slow things down.

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ICE BOFA Bond Market Volatility Index (MOVE)

This led to a big move higher in the ICE BOFA Bond Market Volatility Index (MOVE). But despite the big jump in the MOVE index, the VIX index was lower on the day.

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We will have to see what tomorrow brings. I suspect the selling isn’t finished because rates are up a lot, and the move has been fast. At least for today, the put wall at 4,300 and the 0DTE crowd appear to be enough to save the day. As we move closer to Friday and the JPM Collar expiration date, I wouldn’t be surprised to see that put wall roll lower towards 4,200, which could open the path to a more significant drop.

More tomorrow.

More By This Author:

The Stock Market Decline May Not Be Over As Credit Spreads Begin To Widen
Here's Why The S&P 500 May Be Heading To 4,200
Rates Explode Higher On September 21 Tanking Stocks, But Now Its Time To Watch Spreads

Disclaimer: Mott Capital Management, LLC is a registered investment adviser. Information ...

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