May OPEX – It’s Finally Here
A pretty boring day, with some games being played ahead of tomorrow’s options expiration. Gamma levels should drop significantly at tomorrow’s open, removing the “buy-the-dip” activity we’ve seen around 5,980. The “sell-the-rip” pattern near 5,920 is also likely to disappear.
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After we get through tomorrow, the entire options landscape is skewed to positive delta, and I’d think these positions get unwound at some point. This is nearly the exact opposite of where we were heading into April opex, when the entire chart was basically red.
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The S&P 500 bottomed on Monday, April 21, the day after the April Opex. We know that OPEX can often serve as a turning point for the market, so I would not be surprised to see a change in trend here.
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Tomorrow, we get that import/export data that I have been eagerly awaiting. For now, the market has escaped inflation in the CPI and PPI; we will see if it can escape higher import prices. Twenty years of data suggest that when prices paid indexes in the Philly and Empire State surveys rise, import prices rise, too.
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We saw some further strengthening in the Taiwan New Dollar today, and honestly,the chart would almost suggest that it strengthens further. One can see it has broken that minor short-term uptrend.
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It looks the same for the Korean Won. Both of these countries, of course, are huge exporters of semiconductors and electronics.
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While I have an idea as to why these currencies are strengthening, based on what I have read, it is primarily due to big life insurance companies bringing money home. It’s the why now. We have not heard anything about the status of chip tariffs, and the timing of these FX moves seems to align closely with the closing of the public comment period on Section 232 for semis. Otherwise, this price action is odd if tariffs on semis aren’t coming soon.
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. ...
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