Title: Stock Market Roller Coaster: CPI Report Confusion Leads to Sharp Rise
The stock market started the day on a flat note and then took a sharp turn, only to rise sharply following a confusing CPI report. By the end of the day, it became evident that the report indicated the Fed was unlikely to cut rates by 50 basis points in September.
The day began with stocks slightly higher as implied volatility fell. However, selling pressure picked up, causing the S&P 500 to drop until around 10:45. The index found support at 5,400 and bounced back, likely due to put holders selling their puts, pushing implied volatility down and leading to the upward movement.
Despite the core CPI coming in higher than expected at 0.3% month-over-month, the bond yields only rose by a small margin, causing the yield curve to narrow to 1 basis point. This trend suggests that the steepening of the yield curve will continue in the near future.
The afternoon saw negative gamma-induced short-squeeze behavior, with the S&P 500 facing resistance at 5,550. Nvidia played a significant role in driving market gains, but the stock may face resistance at $118 to $120 due to option gamma levels.
Overall, the market felt uncertain and confusing, with Nvidia’s movement following the CEO’s talk at a conference impacting the overall sentiment. The S&P 500 is currently at the 61.8% retracement level from last week’s decline, indicating a relatively normal market behavior after significant losses.
In conclusion, the market’s reaction to the CPI report and Nvidia’s performance highlights the importance of staying informed and cautious in volatile market conditions. Investors should pay attention to key resistance levels and potential stock movements to make informed decisions about their investments.