Stocks Surge, Disregarding Previous Patterns
The stock market saw a surge today, disregarding the 2b top pattern that seemed to have formed yesterday. The gains were particularly notable overnight during a low-volume session, raising questions about the sustainability of this upward movement.
Upon regular trading hours, the market only advanced by 13 basis points, indicating a more subdued performance compared to the overnight gains. There were indications of a gap pattern forming at the open, reminiscent of the post-Labor Day drop. This raises concerns that yesterday’s rally may not be sustainable and that the gap could potentially be filled in the future.
QYLD to Sell Nasdaq Options?
QYLD faced the task of buying back 19,450 strike price calls that were set to expire today. The sudden surge in the price of these options from $110.30 to approximately $400 per contract led to a significant increase in notional delta from $4 billion to $8 billion. The buying back of option contracts commenced around 2 p.m. and continued throughout the afternoon.
It is worth noting that the overnight rise of 2.14% in just 146k contracts contrasted with the marginal increase of nine basis points during the 7-hour trading period with 415k contracts. Today, QYLD is expected to sell around $4 to $5 billion in notional NDX options, potentially affecting NASDAQ futures.
Quarterly OPEX Awaits
Today also marks the quarterly options expiration (OPEX) day, where the market makers will determine the fate of holders of 5,600 calls that surged in value from $42.70 to over $100.
Yield Curve Continues to Steepen
The yield curve continued to steepen, closing up five basis points at around 14 basis points. Historical trends suggest that when the yield curve is flat or inverting, the Nasdaq 100 tends to rise, while a steepening curve often leads to a decline in QQQ. This pattern implies that the recent rally in QQQ might not be sustainable if the curve continues to steepen.
In conclusion, today’s market movements reflect a mix of patterns and indicators that could influence future trends. It is crucial for investors to stay informed and adapt their strategies accordingly to navigate the dynamic landscape of the financial markets effectively.