By: Michael Kramer, Investment Adviser
Stocks finished the day higher in a more balanced trading session compared to yesterday. Interestingly, last Thursday appeared significant given the strong news from Nvidia and the court ruling on tariffs. Despite that positive news, the market couldn’t hold its morning gains, and by day’s end, powerful reversal patterns emerged in the S&P 500.
Today’s price action challenges those reversals, positioning us to retest the highs from the overnight session highs between last Wednesday and Thursday.
The CDX High Yield Index has improved since mid-April but has not strengthened nearly as much as the S&P 500.
The EUR/USD 5-year cross-currency basis swap spread hasn’t improved much either; in fact, it’s trending lower, suggesting tighter dollar funding conditions.
The MOVE Index has now risen for two consecutive days, returning to 100. More interestingly, when you invert the MOVE Index, it closely resembles the S&P 500.
Taiwan, the semiconductor capital of the world, has recently seen its stock market underperform.
Nor have the Nikkei 225 USD futures contracts.
The BTIC S&P 500 Total Return Futures certainly haven’t kept pace with the S&P 500 cash index.
The S&P 500 has even diverged from the DXY.
When you take seven different assets from various parts of the market, and six of them say one thing while one says something entirely different, you have to wonder what that one asset knows that the others don’t.
In a few weeks, we’ll either look back at today and say, “Yes, all the warning signs were there—how did everyone miss them?” or we’ll say, “Wow, the S&P 500 knew something the rest of the investing world didn’t.”
Originally posted on Jun 3, 2025. See Mott Capital blog for more charts.
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VIA SHUTTERSTOCK
FOOTNOTES AND SOURCES
- CDX High Yield Index: A credit derivatives index that tracks the cost of insuring high-yield (“junk”) bonds against default, used to measure risk in credit markets.
- EUR/USD 5-year Cross-Currency Basis Swap Spread: A financial indicator measuring the relative cost of swapping euros for U.S. dollars over five years, reflecting how easy or difficult it is to obtain dollar funding internationally.
- MOVE Index: An index that measures expected volatility in U.S. Treasury yields, indicating market uncertainty regarding interest rates.
- BTIC S&P 500 Total Return Futures: Basis Trade at Index Close (BTIC) futures contracts linked to the S&P 500 Total Return index, which reflect the overall returns (including dividends) of the index.
- Semiconductor capital (Taiwan): Refers to Taiwan’s central role as the leading global hub for semiconductor manufacturing, crucial for global tech supply chains.
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.
