The Secret Behind the Stock Market’s Biggest Turnaround in Years Revealed
In a surprising twist of events, stocks experienced a monumental shift on Wednesday, reminiscent of the historic turnaround on Oct. 13, 2022. But what was the catalyst behind this dramatic change in investor sentiment?
According to one cross-asset strategist, the surge in stock prices was not due to any fundamental shift in market outlook, but rather driven by activity in the options market. Nomura’s Charlie McElligott highlighted the impact of trading in Nvidia options and leveraged ETFs, which propelled shares of the chip designer and subsequently boosted the broader market. In an emailed commentary to MarketWatch, McElligott emphasized the significant influence of the “NVDA Options and Leveraged ETF Industrial Complex” in moving risk assets.
Interestingly, traders had a similar experience almost two years ago on Oct. 13, 2022, when stocks witnessed a historic reversal following the release of inflation data. This event coincided with the start of the current bull market, with the S&P 500 hitting its closing low for the year the day before. Many at that time speculated that the intraday swing was driven by trading in 0DTE options. However, this time around, the focus shifted to Nvidia calls instead of S&P 500-linked 0DTEs.
Nvidia’s stock continued its upward trajectory on Thursday, poised to reach its highest level in two weeks with a 1.5% increase in recent trading. The surge was sparked by CEO Jensen Huang’s speech at a Goldman Sachs Group conference on Wednesday.
In conclusion, the recent market dynamics underscore the significant impact of options trading and leveraged ETFs on stock prices, highlighting the interconnectedness of various market forces. Understanding these dynamics can provide valuable insights for investors looking to navigate the complexities of the financial markets and make informed decisions to protect and grow their wealth.