The Stock Market Will Be Unleashed On June 18

Today there was carnage in the reflation trade, no surprise, right? We have been talking about this for some time, and we knew this would happen. All the signs were there. Meanwhile, technology outperformed, not sure about this lasting past tomorrow, to be honest. Tomorrow is Quadruple witching, and it likely had a very, very heavy hand in today’s technology rally. After all, something had to perform to hold the S&P 500 at the big gamma level of 4,220. Notice the 4,221 close; that’s not by chance.

 

But the big problem is that a ton of that gamma will disappear on tomorrow’s opening because index options and futures expire at the open. That means forces of gravity holding the S&P 500 at 4,220 disappear. Depending on how those Put and Calls options are hedged, it could mean the amount of volatility we see in the market picks up dramatically.

If not for the rally in technology today, it would have been a blood bath, with the Dow Jones Transports down 2.1%, the XLF down 2.96%, the XLE down 3.4%, the XLB down 2.2%, and so on. The NASDAQ Composite was up about 90 bps, but did you see where it closed? 14,161. So no record close, no breakout.

Somehow, the number of stocks in the composite above their 50-day moving average actually fell. Very odd, tells me not all stocks participated.

S&P 500 (SPY)

Meanwhile, the Advance/Decline on the S&P 500 fell for the fifth day in a row, while the RSI and MACD continue to weaken.

Perhaps the technology sector keeps rising; given their forecasted growth rates for next year, it doesn’t seem likely.

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

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James B. Paxton 1 month ago Member's comment

That's a very well written analysis. Appreciate the learning opportunity.