Stocks had a big run-up into the close on Friday, March 26, which seemed like a mechanical move higher that was driven by a surge in futures volume. This sent S&P 500 futures higher by more than 20 handles in the final five minutes; it was a rush, it would seem, to get hedged into the close.

There was a rather large increase in put activity in the S&P 500 options market. Perhaps that increased volume resulted in a surge in market-makers’ hedging activity, which helped to push prices higher. If the put options were sold, that would cause market-makers to be long puts, which means they would have to hedge by buying S&P 500 futures.

This is just a thought, however, and I unfortunately won’t know until I get to look at open interest changes on Monday morning, and it likely won’t matter by then.

S&P 500 (SPY)

Despite the index closing at a new high, it didn’t pass resistance at 3,985 in the cash market after nearly falling off the cliff on Thursday morning. Meanwhile, the S&P 500 futures closed around 3,960, which I have deemed to be the very top end of the range for the S&P 500, leaving it to be tested one more time.

One more time, I will defend that as the top of the range, and one more time, the market will challenge my belief. If it fails, it fails. This 3,950 to 3,960 region has been in the upper range since the beginning of the year, and it has been a better call than most have had over this period of time. Certainly, a much harder call than saying the S&P 500 will climb to 4,400, just because.

If we finish lower on Monday than Friday’s move, higher movement would invalidated and could be seen as a rejection of the previous all-time highs, and the region at 3,960 would stick as the upper bound.

If 3,960 fails to hold as resistance, it would be because the VIX is finally breaking down below 20 for good. I have had so much confidence in the 3,960 level on the S&P 500 over the past few months because I believed the VIX was at the bottom of the range, around 20. But now the VIX has had its most serious test, and that is because the VIX closed on Friday at 18.9 for the second time last week.

VIX (VIX)

The VIX is finally falling because we can now see implied volatility levels dropping across the market. This is because volumes are falling across stocks, resulting in market-makers reducing their options pricing.

This is because the call volume in technology stocks has more than been cut in half since the beginning of February due to rising interest rates.

So while some may point to the idea that the VIX is falling because the fear in the market is receding, this is incorrect. The VIX is falling because investors are fearful of buying calls. Because the call volume is falling, market-makers push implied volatility levels lower as their risk levels aren’t as high. The VIX is merely normalized as a result of fewer people trading.

NASDAQ 100 (QQQ)

This issue is now front and center in the NASDAQ 100, which has been unable to reclaim its highs and will likely not be able to do so unless those call buyers return. Remember, call buying results in the market-maker being short calls, and forces them to hedge by buying stock. That has been one of the driving forces behinds the NASDAQ’s rally.

The next major level of resistance for the NASDAQ 100 is around 13,100, and then around 13,600.

Micron (MU)

Micron will report results this week, and it could be a significant report—especially given rising prices and how it may affect Micron’s gross margins and guidance. Imagine if AMD (AMD)'s and Nvidia (NVDA)’s lack of margin expansion last quarter turns into margin compression when Micron report results.

While higher inflation expectations help the reflation trade, inflation is not good for margins or earnings if the company can’t pass on the higher prices. Imagine how the market might react.

On Friday, a trader sold 10,000 contracts of the May 21 $87.5 calls and bought the $87.5 puts. The trader laid out $0.90 per contract net, which means they are looking for the stock to fall below $86.60 in the weeks following results. The chart remains very weak, with an RSI trending lower and a good chance of falling back to $74.20.

ROKU (ROKU)

Roku should continue to deflate this week and is still on a path to $275. The shares are now down 40% from their peak and are likely nowhere near a bottom. This is not a disruptor, no matter what anyone says. Just ask yourself, if this was a truly booming opportunity, why wouldn’t Amazon (AMZN) be all over it? It hardly even makes Amazon’s quarterly report.

Mosaic (MOS)

Someday, it feels like we are reliving 2010 and 2011. The good-old inflation trade from all the money printing stories is sending commodity stocks higher, except money-printing alone doesn’t lead to a higher price. People actually have to want to buy the stuff. I remember those days well. I remember owning VALE, Stillwater, Mosiac, Rio Tinto, BHP, Freeport, and all the big players.

Today is the same story to some degree, and the ending is likely to be the same. Mosaic has a lot of resistance, around $35, and the RSI is now trending lower. A close below $30 would set up a further drop to $26.

Freeport (FCX)

Freeport has had a big run, but I have noticed over the past few weeks that non-commercial traders have been closing out their long copper future positions pretty quickly, which means that copper prices can fall more and this is likely bad news for Freeport.