By: Michael Kramer
What a boring day! At least yesterday, the price moved some, but today was just blah. There was sideways trading ahead of tomorrow’s March retail sales report. I’m not sure how much that is playing into today’s price action, but it was boring. The good thing is that I’m getting a lot of rest and have plenty of time to lie around.
When you go from big, impulsive moves to these sideways, blah periods of time, it is a warning message to me that we are just consolidating sideways here, that this is not the start of some big initiation higher.
But with the VIX at 29, a few more days like today, and we could see it at 23, and if the VIX goes to 23, that would suggest further upside. So either volatility is going to pick up, and “something” will trigger another leg down, or the slow burn in volatility will help grind stocks higher.
Volume was also non-existent today, which makes the price action even more interesting. This suggests a lack of sellers in the market, so the fact that the market is stuck with anemic volume levels tells us the bulls may be in trouble.
For various reasons, it would seem to me that another leg lower is likely. Maybe it’s because of the way the chart looks, with those two big down legs, which look more like waves 1 and 3 to me. Right now, a lack of movement is the market’s friend because the less it moves, the more IV will burn off, and the more likely it is to go higher, but something suggests to me that a move higher isn’t going to happen.
Originally posted on April 15, 2025 on Mott Capital blog
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VIA SHUTTERSTOCK
FOOTNOTES AND SOURCES:
Terms By ChatGPT:
1. Sideways Trading
- Definition: A market condition where prices move within a narrow range without forming a clear upward or downward trend.
2. Consolidating
- Definition: A phase where the market trades within a tight range, often following a significant move. It usually indicates indecision and precedes a breakout or breakdown.
3. Impulsive Moves
- Definition: Sharp and strong price movements often driven by high momentum or significant news, typically in the direction of the prevailing trend.
4. Initiation Higher
- Definition: The beginning of a strong upward trend. The phrase is informal and may be interpreted as the start of a bullish breakout.
5. VIX (Volatility Index)
- Definition: The CBOE Volatility Index measures the market’s expectations of near-term volatility, often called the “fear gauge.” A lower VIX suggests calm markets; a higher VIX suggests fear or uncertainty.
6. Slow Burn in Volatility
- Definition: A gradual decline in implied volatility over time, often due to lack of price movement. This can support gradual price increases, especially in options-heavy markets.
7. Anemic Volume
- Definition: Very low trading volume. It often implies a lack of conviction or participation by traders.
8. Bulls May Be in Trouble
- Definition: A phrase suggesting that investors who are betting on prices rising (“bulls”) may face challenges or potential losses.
9. Leg Lower / Another Leg Lower
- Definition: A further downward move in price, typically as part of a larger trend consisting of multiple “legs” or segments.
10. Waves 1 and 3
- Definition: Refers to Elliott Wave Theory, a technical analysis method where market moves are segmented into predictable wave patterns. Waves 1 and 3 are typically strong down moves in a bearish cycle.
11. IV (Implied Volatility)
- Definition: The market’s forecast of a likely movement in a security’s price. Higher IV generally means higher option premiums and more expected movement.
12. IV Burn-Off
- Definition: The reduction in implied volatility, usually during periods of low price movement, which decreases the value of options.
DISCLOSURES
This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
