Oil prices surge to two-week winning streak as Iran supply fears grip markets
Stocks closed higher, with the S&P 500 up around 50 bps. The VIX 1-day completed its reset, dropping to an intraday low of around 8. With the jobs report on Wednesday, I would expect the VIX 1-day to rise and close higher today.
Today, there will be a settlement of about $40 billion in T-bills, followed by another $22 billion on Thursday.
The combination of the cash drain and rising implied volatility could set up an interesting trading session. We know that stocks tend to be weak on settlement days and that rising implied volatility pushes stocks lower most of the time. So I would expect today to be a challenging day. I’m obviously not a fortune-teller, but that is what the mechanics would suggest.
There is a good chance the market rallies on Wednesday following the job report, once volatility has subsided, but Thursday could be a repeat of Tuesday.
I counted 24 settlements since October 28, during which T-bills drained liquidity. In December, T-bill issuance was reduced, thereby adding liquidity to the market. On 8 of those settlement dates, the S&P 500 was higher; on 16 days, it was down.
Now watch the S&P 500 go up 2% just to screw with me….LOL