We bid November 2025 goodbye and we say hello to a tryptophan high (yes, that rhymes on purpose).
You EDGE subscribers, our next live Discussion is Thu Dec 4. Brian Wilson will lead it. I’ll be in San Antonio for NIRI Senior Roundtable and a discussion about what fellow and much more famous panelist Mike Green calls the Giant Mindless Robot in the stock market. Come join!
In the stock market, we look at periods, patterns. Broad Sentiment, Context, Divergence. Supply, Demand, Volatility.
Broad Sentiment, our algorithm metering flows and prices, despite the jump yesterday faded to 4.7. Take a daily trended read and it’s 4.1. Supply, which is Reg SHO Short Volume with our proprietary treatment, is 52% in S&P 500 stocks.
Shouldn’t these conditions mean falling stocks, not surging stocks?
Which brings us to CONTEXT. Things change with options resets. Options expired Wed-Fri last week. VIX resets Wednesday were uneventful. The market ruptured Thursday with index options resets. And since then stocks have soared with Friday’s stock and ETF options expirations, Monday’s new options, and yesterday’s Counterparty Tuesday square-ups.
Look at KSS, ANF, ZIM. Now, the latter had news out about a strategic review (the freight business is in the tank but machines read things and react, forcing COUNTERPARTIES to buy – like getting called and having no stock and being forced to step into the market and pay adverse prices). But following weak retail sales data in the economy, retailers ANF and KSS exploded.
It’s forced covering. It’s not rational but CONTEXTUAL.
The entire market turned with options from falling apart to surging. This is how our stock market works now, thanks to ETFs that need baskets of stocks, machines that price them versus equities, and the ubiquity of derivatives. It pulls moves forward (and can suddenly and without warning pitch forward and plunge).
Which brings us to Divergence — Demand and Supply moving away from each other. . EDGE users, you don’t look at the data across the EDGE Dashboard and go, “Wow, awesome!” There are 15 choices in Daily Trading Ideas.
But Big Tech has exploding SUPPLY. That’s market-makers creating stock to fill orders in support of mushrooming derivatives prices. NVDA has lost $800 BILLION of market cap! NVDA has been the claxon of the market for the better part of five years. It peaked around $33 Nov 29, 2021 (remember that Thanksgiving?), and didn’t return to that price level until May 2023.
We’ve already been given a verdict on AI by NVDA. People missed it because they’re looking at GOOG.
And we conclude with VOLATILITY. I don’t know what happens next. I do know volatility in SPY is twice normal levels, at 2%. In underlying stocks it’s about 3%. It’s a rickety structure but it’s our structure! A little humor there.
Just as diverging Demand and Supply are a bedrock harbinger of higher prices in any market, volatility is always the seismic signal of change. It started Oct 10. It ripples, creeps, spreads, bleeds. Big moves, both down and up, are harbingers of ends and beginnings. We haven’t punctured through 4.0 Demand, nor has SPY broken below 5.0 since the Spring.
But since we’ve had a long and glorious run, I conclude volatility now is a beginning of something, an end to something else. We just don’t quite know what yet. Whatever happens next, good or bad, I can reflect gratefully on a full, exhilarating year — with an eye toward the meal we’re plotting for tomorrow too.
I sign off gratefully. Catch you the other side.
