S&P 500 Vulnerability Grows Beneath The Surface
The S&P 500 finished the day lower by about 34 basis points. The index now appears to be forming a potential reversal 2b top after attempting to break out to a new high. Instead, it reversed lower and closed the session back near support at 6,920.
A failure to push through the 6,950 area, followed by a drop below 6,920, would open a path toward 6,835. More importantly, the index has done very little since late October, and such a move would also put it at risk of breaking the uptrend that formed off the November 21 lows. As a result, the index is in a more vulnerable position than it may appear at first glance.
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BTIC S&P 500 Total Return Futures (EFFR) finished lower again today for the December 2026 contracts, at their lowest level since March 2024. While some may view this as bullish because financing costs are falling, one would have difficulty finding a time when the S&P 500 has risen, as these futures contracts were falling. At least that is what I have observed. This, to me, is outright bearish and a sign that demand for leverage is slipping or positions are being closed.
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Implied volatility rose today ahead of Friday’s jobs report and the Supreme Court’s opinion releases, which may include a decision on tariffs. Kalshi assigns a 30% probability that the Court rules in favor of the tariffs, implying a 70% chance they are struck down.
I would expect implied volatility to continue rising into this news event. The VIX 1-day is likely to be materially higher by Thursday afternoon and may even continue to rise after the jobs report, since the Court’s rulings are expected later in the day. A VIX 1-day reading in the 15 to 20 range seems highly likely, in my view.
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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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