VIX Options Expiration May Unleash The Stock Market

I’m back after a rare day taken off. Stocks finished mostly higher yesterday, with the S&P 500 rising by around 1%. The index finished at approximately 3,720, with options expiring on Friday and the big gamma level still at 3,700. I doubt we will see much and advance from here.

That gamma level should work to keep the S&P 500 index pegged at least until Friday morning, but we will see. What complicates things is that VIX options will expire today, which means we should see it begin to trade more freely and break either higher or lower from this 30 to 32 region.

VIX Daily Chart

What may have a big impact will be some economic data today, which could work to move rates higher, with the eurozone and the UK CPI report today, and then US housing data today. It almost appears as if there is a cup and handle pattern in the 10-year rate, and if so, that would be a bullish continuation pattern that could send the 10-year higher. Yesterday, the BOE confirmed it would start selling gilts on Nov. 1, and a hotter-than-expected UK CPI report could increase rate volatility.

The ICE BofA Move Index is still very high, suggesting equity market volatility may be too low.

ICE BofA Move Index Hourly Chart

I guess we will just be left to wonder for another day if what we are seeing forming in the S&P 500 futures is a bear flag or not. We should have a good idea by today, would be my guess. The big question is if all the owners of puts down at 3,600 will let all their puts expire worthless on Friday morning.

SP 500 Futures Hourly Chart

There is a similar chart pattern in the QQQ with more of a bear flag. The QQQ has a big gamma level at $270, leaving little room to move, and the QQQ has a lot of puts down at the $260 level. So it comes down to whether or not the $260 put owners will let the QQQs run away from them.

QQQ Hourly Chart

Netflix

Netflix (NASDAQ:NFLX) reported results yesterday. I’m surprised by the market reaction. Yes, results for the third quarter were better, but that was a meager hurdle to beat. The fourth quarter guidance wasn’t good, with earnings guidance coming in below estimates, revenue guidance missing, and subscriber growth outlook a bit better. The company also noted it would not provide paid membership guidance after the fourth quarter because they are trying to shift investors’ focus. Remember how well that didn’t go for Apple (NASDAQ:AAPL) when they stopped giving iPhone breakdowns? It took a while for that model to be accepted; I don’t think it will be different for Netflix. Essentially, this move indicates that this is no longer a subscriber growth story, and they are trying to refocus investor attention away from that part of the business. Additionally, I wonder how much the new ad model will cannibalize their paid user base.

The stock traded up to around $270 after hours. We will see if those gains hold for the rest of the week.

Netflix Daily Chart

Intuitive Surgical

It would be nice if Intuitive Surgical (NASDAQ:ISRG) broke that downtrend after it reported results. ISRG saw procedure growth move back to 20% and reported better-than-expected results. The company also increased its procedure growth for 2022 to 17 to 18% from 14 to 16.5%. A move above $210 could send the shares back to $230.

Intuitive Surgical Inc Daily Chart

Original Post