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S&P 500 Gamma Squeeze Loses Steam Above 4,375: What Comes Next?

Yesterday was a bizarre day; maybe it was election day, and the kids were home, or maybe it was because I slept in until 6:45 AM. I couldn’t seem to get a feel for things, and that seemed mostly because there were a few big disconnects in the market.

We saw rates fall, the dollar rise, the VIX fall, and stocks rally. This has not been what has been happening for some time, and this is the first time I have seen this disconnect for months.

The dollar has been a reliable gauge for the VIX and credit spreads for some time, not yesterday, not the last two days. This is odd and suggests that either the dollar strength is due to fade, the VIX’s declines are due to reverse, or something in the relationship is breaking down.

The dollar also tends to be a fairly reliable indicator for the equity market, and when inverted, one can see how changes in the dollar have on…

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