Market Wrap
The SPX closed 1.4% higher today, boosted by mega cap growth stocks (MGK +2.7%), which benefited from retreating yields/oil prices and thus easing rate hike expectations in the afternoon.
Initially though rate hike expectations tightened significantly, as Bullard and Daly tried to correct the market’s wrong assumption of a fast pivot via verbal intervention, but the unexpected crude oil build at 10:30 neutralized those efforts again to some degree (click here for chart).
https://www.tradingview.com/x/69dY5Qp6/
With the risk of a kinetic conflict surrounding Taiwan out of the way, markets started to price out more immediate risk (VIX) and tail risk, as expressed by SKEW or the VVIX (see chart below), and investors can no re-focus on the overall macro story, Friday’s NFP release, and Friday’s CPI.
https://www.tradingview.com/x/A9ZPGTcA/
Gamma Discussion: Dealer gamma increased again after yesterday’s dip and the SPX now seems more firmly anchored around the large gamma strike at 4150.
Looking ahead Friday will bring a minor expiration of weekly options which will kill around 57M of gamma, which translated to about 26% of today’s total net gamma.
Some color on the recent rally: VandaTrack was running an interesting report today according to which retail investor flows have been a major driver of the rebound in the last few days (we posted some charts in our Dashboard)
According to Vanda, aggregate buying has been consistently above the YTD average (avg. US$ 1.36 bn over the last five days), while the focus wason classic tech stocks such as TSLA, NVDA, AAPL, AMD, and AMZN.
Vanda suspects that retail investors will continue to buy mainly single stocks and Tech over the next days or weeks – as long as the rally consolidates.
Vanda believes however, that the pick-up in risk sentiment is likely to be fragile given the YTD large portfolio losses, and retail investors could capitulate, if the S&P 500 re-tests the lows.
Initially though rate hike expectations tightened significantly, as Bullard and Daly tried to correct the market’s wrong assumption of a fast pivot via verbal intervention, but the unexpected crude oil build at 10:30 neutralized those efforts again to some degree (click here for chart).
https://www.tradingview.com/x/69dY5Qp6/
With the risk of a kinetic conflict surrounding Taiwan out of the way, markets started to price out more immediate risk (VIX) and tail risk, as expressed by SKEW or the VVIX (see chart below), and investors can no re-focus on the overall macro story, Friday’s NFP release, and Friday’s CPI.
https://www.tradingview.com/x/A9ZPGTcA/
Gamma Discussion: Dealer gamma increased again after yesterday’s dip and the SPX now seems more firmly anchored around the large gamma strike at 4150.
Looking ahead Friday will bring a minor expiration of weekly options which will kill around 57M of gamma, which translated to about 26% of today’s total net gamma.
Some color on the recent rally: VandaTrack was running an interesting report today according to which retail investor flows have been a major driver of the rebound in the last few days (we posted some charts in our Dashboard)
According to Vanda, aggregate buying has been consistently above the YTD average (avg. US$ 1.36 bn over the last five days), while the focus wason classic tech stocks such as TSLA, NVDA, AAPL, AMD, and AMZN.
Vanda suspects that retail investors will continue to buy mainly single stocks and Tech over the next days or weeks – as long as the rally consolidates.
Vanda believes however, that the pick-up in risk sentiment is likely to be fragile given the YTD large portfolio losses, and retail investors could capitulate, if the S&P 500 re-tests the lows.
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