Price Action Grows More Unstable Ahead of Jobs Report: Where Will Rally Top Out?
Michael Kramer | Mar 08, 2024 15:37
Yesterday was a bizarre day across the board, from market price action to some strange Q&A with Powell in the Senate to Broadcom's (NASDAQ:AVGO) bizarre post-earnings price action. There are just some days where you can say - 'yeah, nothing made sense.'
Looking forward to today's jobs report now.
I mean, first, there was an overnight trading session that saw the futures fall quite a bit, only to see them mysteriously rally starting around 3 a.m. on no news whatsoever—or any that I could find.
From the low at 3 a.m. to the high at 2 p.m., the Nasdaq rallied by almost 2.5%, really for no good reason other than the fact that it appears that the stock market has officially turned into a hyper-casino.
In addition, we saw the spread between a 1-month 90% moneyness and 110% money Nvidia (NASDAQ:NVDA) options fall to -5.1 today, the widest spread over the past two years.
That means IV for a 10% upside in Nvidia is higher than for a 10% downside. Maybe investors are now pricing not only the GPUs Nvidia is selling but all the diseases and cures AI will solve someday.
In the meantime, the 3-month implied correlation index hits its lowest level ever today.
These just don’t feel like things you typically see during periods of level-headed thinking and feel much more like something of a manic nature.
Of course, Broadcom, whose stock has surged 70% since the beginning of November, reported what I thought were the most unimpressive results given the run and missed estimates on its semiconductor segment and then provided inline guidance, with nothing special talked about on the conference call.
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It is surprising to see that shares have only fallen a mere 3% when we have seen stocks punished far worse for what seemed like decent numbers.
Maybe that will change today. I don’t know, but the price action we are seeing currently seems unstable. It can go on for longer, but none of this seems normal, and I have seen some bizarre things over the past 30 years.
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