Quadruple witching came and went today. The S&P 500 finished the week dead unchanged.
The story sits in the bond market instead. The 10-year yield is parked at 5% and setting up to break higher.
I’ll be watching that all weekend. When the bonds break, a long list of other asset classes gets dragged into it.
Start with where we’ve been. We’ve traded inside the same volatility box since May 4th. Five months of pinging back and forth.
The futures rolled from September to December this week. The new contract sits about 68 points higher, so the box moved up with it.
Center of the range now sits near 7550. A selloff into that level next week means nothing to me. A push above 7750 gives a rally real legs.
Today handed you another rotation session. Financials opened lower and rallied straight back, and over 80 stocks were trading down this morning.
The Fed hiked this week and the market rallied on it. Traders had roughly a 90% chance of a hike priced in, so the unanimous vote delivered exactly what everyone expected.
Financials still broke down outside their expected move. The Fed gave no forward guidance either, which leaves nothing left to trade off that meeting.
Now to your risk gauge. The VIX still calculates a number. That number comes from 30-day SPX options that barely change hands anymore.
Here’s what I broke down in today’s session:
- The 10-year yield sits at 5% and is forming a breakout. I think rates rip higher from here, and the bond market puts pressure on everything else.
- The S&P 500 has traded inside one volatility box since May 4th. 7550 is the new center. Above 7750 opens the door to a substantiated rally.
- 218,000 calls traded a single at-the-money strike today out of 5 million total contracts. Out at 28 and 31 days, where the VIX takes its reading, fewer than 1,000 contracts traded.
- This week priced a $128 expected move and used every bit of it. Next week prices $100, a 30% contraction. I’m taking the over.
Two tech stocks now carry more market cap than every house in the United States. Microsoft sits at $3.6 trillion and Nvidia sits at $5.3 trillion.
Oil near $100 a barrel used to rattle this market. Nobody gives a damn right now.
Monday is Yom Kippur, so expect thin volume and a slow tape. The week builds from there.
I have fear because the market doesn’t. That gap is why I’m taking the over on next week’s move.
