Yesterday’s stock market performance was as exciting as watching paint dry – a sideways shuffle with minimal action. The index hit a firm wall of resistance around the 78% retracement level, signaling a potential slow-motion descent. By filling the 5,198 gap, the market has shown equilibrium.
A visible trend line, stretching back to late April, now stands as an imposing barrier. It seems that all gaps created since the peak on April 1 have been sealed tight. No chinks in the armor remain vulnerable.
Yesterday saw a rapid surge in the 1-week 50 delta options implied volatility, foreshadowing the upcoming report next Wednesday. These short-term indicators of IV are slated to climb as we approach the crucial CPI report next week.
With the market now hungrier for data than ever before, each inflation and job report is bound to become a high-stakes IV event. The following week brims with the PPI, CPI, and retail sales reports consecutively.
High-yield spreads widened their arms yesterday, tangled in the web of short-dated IV levels. A continued rise in IV might pave the way for further spread expansions.
Arm Holdings faced the music yesterday, showcasing superior performance on the revenue front but faltering on full-year revenue guidance. The projected range of $3.8 billion to $4.1 billion, with a midpoint of $3.95 billion, fell short of the estimated $4.01 billion. In this unforgiving market, missing the mark often equates to punishment. ARM shares took an initial 8% hit, with potential for more downside.
Friday’s expiration implied volatility soared to a staggering 190%. Calls at $110 and $120 strike prices are likely to shed significant value, burdened by market-maker hedges being untangled. Support may emerge near the $100 level, fortified by substantial put gamma. However, once breached, the $90 level looms as the next support battleground.
A technical breakdown of the April-initiated uptrend could cascade ARM Holdings further south, eventually bridging a gap formed back in February.
