The S&P 500 broke another record on Wednesday as the Federal Reserve reassured investors that it did not want to rush to tighten fiscal policy – and some of the momentum will continue until Thursday.
But it may not last long.
We call of the day is that a number of technical factors suggest that the index is currently being bought over and is likely to be dragged down in the short term, according to Michael Kramer of Mott Capital Management.
Last week, Kramer outlined how the March 2020 rise in the S&P 500 SPX,
challenged, and that the index had to break higher to prevent it from falling through the trend line. And it did: the index hit a record high on Monday to end the trading week on a positive note that has permeated the past few days.
However, the momentum stuck with the index of about 4 080 points. According to Kramer, the index, based on the concentration of stock market option contracts, is likely to move to 4,000 points rather than 4,100 points. This is because most of the “gamma” seems to be aimed at 4,000, Kramer said. Gamma is an important measure of risks in options.
Kramer said this concentration will prevent the index from moving much higher, especially since option contracts expire next week.
In addition, the S&P 500, based on the Bollinger Bands, which is a statistical measure that characterizes price and volatility over time, has already been overbought, Kramer said. It ‘will probably cause a drop to fill some of the opening gaps, with the potential for it to drop to 3,960,’ he said.
Meanwhile, Kramer notes that the total volume of call options – the right to buy a share at a certain price – is still falling across the market. This was an important factor in helping the Cboe Volatility Index, or VIX VIX.
to sink well into the pre-pandemic area.
The buzz
Apple AAPL,
according to a Reuters report, he will allege that he is experiencing fierce competition in the videogame transaction market in his lawsuit against Epic Games. The technology giant is facing antitrust claims from the developer of ‘Fortnite’, which focuses on Apple’s control over app and in-app purchases, including the commission of up to 30%.
Jerome Powell, chair of the Federal Reserve, and Kristalina Georgieva, managing director of the International Monetary Fund, will discuss the world economy around noon. Elsewhere on the economic front, 744,000 Americans applied for unemployment last week, a rise of 719,000 in the previous week and exceeding expectations of 694,000. Continued claims without work amount to 3.73 million.
More than 3,200 workers at Amazon’s warehouse in Bessemer, Alabama, voted on whether to unite last week, representing 55% of the total workers in the location. The public portion of the vote is expected to be announced on Thursday or Friday.
Billionaire Peter Thiel, co-founder of the payment system PayPal PYPL,
and Palantir Technologies PLTR,
Thiel said China wants to see two global reserve currencies – not just the dollar – and is trying to boost Bitcoin BTCUSD,
to fulfill that second role.
If you missed it: the minutes of the Fed meeting in March showed that central bank officials seem divided into two camps about the outlook for inflation. The bankers have also made it clear that they will not soon lower the rate of bonds.
The markets
US equities are expected to open mostly higher, near record levels of YM00,
ES00,
NQ00,
This is the same in Europe, where shares were largely higher SXXP,
UKX,
DAX,
PX1,
after investors had a first chance to respond to the Fed minutes, confirming a sustained loose stance on fiscal policy. Asian stocks were mixed but mostly ended the day higher NIK.
HSI,
SHCOMP,
The graph
Interest rates, oil prices and the dollar index are all rising, meaning earnings growth is likely to peak and surpass next year, according to Jesse Felder of the Felder Report blog.
An integral part of the rise in equities over the past year has been the recovery in earnings, which will continue for the next few quarters. But our chart of the day, from Felder, shows that the bearish reversal in fundamental factors – which will be discounted by the market for more than a year in the future – could soon hit equities.
Random reading
A couple from the state of Washington won the lottery twice with tickets from the same store.
Up, up and away: A 1938 comic strip with Superman’s first appearance was sold at auction for a record $ 3.25 million.
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