Stocks Rise As Volatility Plunges One Day Ahead Of Options Expiration
Michael Kramer | Apr 14, 2022 01:22AM ET
Stocks managed to rally on Wednesday, regaining most of what they gave up Tuesday, but not all. It is really amazing how much symmetry there is in the market. I don’t know how many of you remember this, but we talked about this back in December, how sell-offs seem to happen, and respect parallel trends.
This is still the case, with this recent sell-off running lower parallel to the September and January drops. At this point, it seems that the drop should continue along with this general trend until we get below 4,300.
You can also see the potential Head And Shoulders pattern that has formed on the S&P 500.
Yesterday’s rally seemed to be all about the unwind of the VIX and hedging that was placed ahead of this inflation data. The VIX fell by 10% yesterday and closed the gap around 21.25. I don’t think it was anything more than that, along with positioning ahead of today’s monthly options expiration.
The iShares TIPS Bond ETF (NYSE:TIP) fell by around 20 bps on Wednesday; meanwhile, the Qs rose by 2%. After years of following one another, I can’t believe that now that relationship will break down.
It is not unusual for the TIP ETF to lead the Invesco QQQ Trust (NASDAQ:QQQ) by a few days to a couple of weeks, so at some point, the QQQ will need to catch up, and as long as the TIP ETF keeps making lower lows, I suspect the QQQ will too.
JPMorgan Chase (NYSE:JPM) fell sharply yesterday after earnings disappointed, which was surprising given how much those estimates fell into results. It sounds like higher rates resulted in a slow down in mortgage originations, while the bank also started to set aside more loan loss provisions. The stock ended up falling below support at $129.50 and is now on its way to $122.
Get The News You Want
Citigroup (NYSE:C) reports later today, and if the result comes in like JPMorgan, then there is a good chance this stock fills the gap down to $43.40.
Goldman Sachs (NYSE:GS) also reports today. JPMorgan saw pretty weak numbers in its investment banking unit but strong trading. I’m not sure where that leaves Goldman, but maybe that means results are mixed. The chart doesn’t look great, but there may be a falling wedge forming, which could lead to higher prices at some point down the road.
Original Post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.