Yesterday’s Market Recap: A Detailed Analysis
Despite the market closing flat yesterday, it was a relatively weak session overall. Only 132 stocks advanced, while 368 declined, showcasing a lackluster performance. The “Troubling Three” stocks took on the heavy lifting, indicating a skewed distribution within the index.
Market Dynamics:
– The S&P 500 declined by approximately 70 basis points, and the small-cap index fell by almost 1.6%, yet there is persistent optimism surrounding the sector.
– Despite this optimism, a closer look at the IWM chart does not suggest an upward trend, raising questions about the basis of this positivity.
S&P 500 Analysis:
What’s Holding It Back?
The S&P 500 appears to be stuck in a range, possibly due to the JPMorgan collar having a call at the 5,750 strike sold at the end of the June quarter. Market makers are theoretically long the calls and need to hedge by being short futures. As the notional value of the calls decays, market makers must cover their short positions by buying back the S&P 500, providing some support to the market close to the strike price.
However, market makers have to short more futures each time the index climbs, creating a position of being stuck until September 30. With a notional delta value of $10 billion, a significant volume day could break this range.
Nasdaq 100 Outlook:
Potential Correction?
The yield curve continues to steepen, reaching a positive 23 basis points, historically signaling a potential correction in the Nasdaq 100. Despite this, the Nasdaq has been trading relatively flat, showing resilience so far.
Micron’s recent results and guidance played a crucial role in its stock movement. With solid guidance, the stock managed to clear the $103 mark, setting a positive tone. However, the stock’s positioning near the $103 region remains a key factor to watch for potential unwind scenarios.
Overall, the market’s performance and key indicators suggest a cautious approach, keeping an eye on potential breakouts or corrections in the near term. Stay informed and be prepared for any market developments that may impact your investment decisions.
Source: Original Post
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