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Stocks Rise As Volatility Plunges One Day Ahead Of Options Expiration

By Michael KramerStock MarketsApr 14, 2022 01:22AM ET
www.investing.com/analysis/stocks-rise-as-volatility-plunges-one-day-ahead-of-options-expiration-200622174
Stocks Rise As Volatility Plunges One Day Ahead Of Options Expiration
By Michael Kramer   |  Apr 14, 2022 01:22AM ET
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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.

S&P 500 4-Hr Chart
S&P 500 4-Hr Chart

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.

VIX 1-Hr Chart
VIX 1-Hr Chart

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.

TIP ETF Daily Chart
TIP ETF Daily Chart

JPMorgan

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.

JPMorgan 1-Hr Chart
JPMorgan 1-Hr Chart

Citigroup

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.

CitiGroup Inc, Daily Chart
CitiGroup Inc, Daily Chart

Goldman Sachs

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.

Goldman Sachs Daily Chart
Goldman Sachs Daily Chart

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Stocks Rise As Volatility Plunges One Day Ahead Of Options Expiration
 

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Stocks Rise As Volatility Plunges One Day Ahead Of Options Expiration

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Comments (6)
Mikailu Muhammed
Mikailu Muhammed Apr 15, 2022 8:43PM ET
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Good see you then, sure what makes money online transactions
Mario tragik
Mario tragik Apr 14, 2022 9:05AM ET
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Always good to see what kramer thinks in order to do the opposite and make some money.
Al Ose
Al Ose Apr 14, 2022 9:05AM ET
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Did that work today?
palmer long
palmer long Apr 14, 2022 8:02AM ET
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the mkt. always rallies before option exploration. Allows the big boys to profit off of options. Works for me.Buy stock options after big decline right before exploration. 25% winner every time. Weeeee
Mohd Izhar Muslim
Mohd Izhar Muslim Apr 14, 2022 4:50AM ET
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Great Once 💯
Jeff Page
Jeff Page Apr 14, 2022 4:09AM ET
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Great job!
maybe John
maybe John Apr 14, 2022 1:59AM ET
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up we go to ath, pullback over, bulls in, rally on
 
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