Today was Quadruple Witching (the simultaneous expiration of stock index futures, single-stock futures, stock options and stock index options) and was the highest level of contracts expiring since 2020.
As the price of in the money contracts turned out of the money today that created a Gamma Squeeze making an artificial pop in the markets.
Overall US stocks have suffered the worst weekly decline since March 2020.
Energy gets slammed as the price of oil fell today. The selling in the energy sector is actually a bit bullish seeing the best sector of the year finally get sold. This is a signal we are getting closer to a bottom.
When D&D looks at the technical we’ve had a topping pattern in the overall market and look like we need to go down another 5% on the S&P 500 to 3500 before we bottom out. Although we are certainly posed to have a near-term Bear Market bounce before moving down to 3500.
Russian President Vladimir Putin calls western sanctions a “blitzkrieg” and that his hand was “forced” to invade Ukraine.
Stock Specific News:
As a part of the military aid package to Ukraine the defense contractor Lockheed Martin is a beneficiary with their HMARS (High Mobility Artillery Rocket Systems) which are desperately needed by the Ukrainian army.
Casino stocks have been hit hard due to inflation causing consumers to pull back spending with Caesars Entertainment down 50% this quarter and both Penn National Gaming and MGM Resorts are down 35% this quarter.
The FDA approves Pfizer and Moderna Covid vaccines for children as young as 6 months.
With the fall in energy stocks today D&D added more to our position in Devon Energy.
Market Knowledge Tip:
A Gamma Squeeze happens when the underlying stock’s price begins to go up very fast within a short period of time. As more money flows into call options from investors, that forces more buying activity which can lead to higher stock prices.
A great example of a Gamma Squeeze was the massive pop last year in the stock of GameStop.
Closing Markets (as of 1:15pm PST)
DOW down -0.13%
S&P 500 up 0.22% (3,674.84)
NASDAQ up 1.43%
VIX down -5.52% to 31.12
2 Year Note up 6.63bp to 3.16%
10 Year Note up 3.05bp to 3.23%
Oil down -6.319% to $110.16 a barrel.
Gold down -0.541% to $1839,90 an ounce.
Bitcoin down -2.11% to $20,540.36
Ethereum down -1.05% to $1,082.52
~ Dave James / Principal Trader and Market Strategist