Navigating The Market

Dispersion Drives The Market To The Extremes

Michael J. Kramer — Wed, 13 May 2026 20:54:49 GMT

Dispersion continues to run very hot in the market, with the S&P Dispersion Index rising to nearly 41 and the 3-month Implied Correlation Index falling below 12. The spread between the two has climbed to a new all-time high of 29, which is notable because mega-cap earnings are essentially behind us, with the exception of NVIDIA. Under normal circumstances, this trade likely should have peaked a few weeks ago. However, with NVIDIA reporting results next week, the trade may finally be nearing its conclusion.

Ultimately, what appears to be driving this dispersion is that, rather than continuing to decline, implied volatility in the S&P 500 is actually rising. That means the average implied volatility for S&P 500 stocks is rising. Because the VIX is not rising, or at least not rising as quickly, it is creating a wider gap in implied dispersion.

One thing that stands out at this point is that 21-day realized volatility is 9.8, while the VIX is at 17.9. To me, that implies traders are betting that volatility will eventually return.

NVIDIA earnings next week could play a major role in this cycle, as we know that after NVIDIA reports, its implied volatility will likely fall sharply, which should help push dispersion lower.

For now, it is a tale of two markets. The technology sector is leading the S&P 500 by 19 percentage points, and every other sector is underperforming. In fact, the energy sector is underperforming the S&P 500 by 20 percentage points. Ironic, isn’t it?

Let us not forget that tomorrow is also a settlement day, and, based on what we saw on Tuesday, a weak trading day tomorrow would not be a surprise.

– Mike

Glossary by ChatGPT

21-Day Realized Volatility — A measure of the actual price fluctuations of an asset over the previous 21 trading days.
Dispersion Trade — An options strategy that profits from differences between index volatility and the volatility of individual stocks within the index.
Implied Correlation Index — A measure of how closely stocks within an index are expected to move together based on options pricing.
Implied Volatility — The market’s forecast of future price movement derived from options prices.
Settlement Day — The date when options and futures contracts are finalized and positions are settled.
S&P Dispersion Index — An index tracking the spread between implied volatility of individual S&P 500 stocks and the volatility of the overall index.
VIX — The CBOE Volatility Index, commonly used as a measure of expected volatility in the S&P 500 over the next 30 days.

Disclosure

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.

Hot PPI, Real Rates To Multi-Decade Highs, And A Concentrated Tape

Michael J. Kramer — Wed, 13 May 2026 16:48:33 GMT

Daily macro and market structure analysis—covering liquidity, options and gamma exposure, dealer positioning, and volatility—to help investors navigate price action across asset classes.

Treasury Yields Breakout as Stocks Rebound From Intraday Lows

Michael J. Kramer — Tue, 12 May 2026 22:01:39 GMT

Stocks finished the day mostly lower but well off intraday lows, after the S&P 500 had been down around 1%. I would not call this a watershed move for the index, but the market did fall on a Treasury bill settlement day, and that is important because it confirms the pattern remains intact for now.

Thursday is the next T-bill settlement day, and we should begin to see significantly higher bill issuance starting next week. If the spring patterns continue to play out, many market participants may find themselves completely offside, with no idea what hit them.

More on Treasury Bills:

The only thing that appeared to save the market today was the gamma positioning heading into Friday. The 7340-7350 area remains sticky and is likely to provide support through the end of this week. That should change next week once the monthly options expiration gamma rolls off. At the very least, today’s move allowed the gap from May 7 to fill.

More on Gamma:

The VIX was also lower on the day. It isn’t often you see this type of spot-down, vol-down session, and I think it supports the idea that today’s rebound from the lows may have been facilitated by put positions being closed out in the S&P 500. The VIX peaked around midday, just as the S&P 500 fell into the gamma support area, and then declined steadily for the rest of the session.

Additionally, the CPI report came in hotter than expected on the core reading, which helped send Treasury yields higher. This pushed the 30-year Treasury yield to around 5.03%, marking its highest close since May 2025.

Right now, the 30-year is at an important level because if it manages to break out from here, it would mean moving above the highs reached in 2023.

The 10-year Treasury yield also finally cleared resistance and the downtrend around 4.45%. If it follows through on Wednesday, yields could be headed significantly higher, given the importance of completing this multi-year consolidation pattern.

I don’t have much more to add at this point. Once we get through the rest of the week, next week will probably be much more interesting.

Mike

Glossary by ChatGPT

Core CPI — A measure of inflation that excludes volatile food and energy prices to better reflect underlying price trends.
Gamma Positioning — Options market exposure that can influence short-term market movement as dealers hedge underlying price changes.
Monthly Options Expiration — The scheduled expiration of monthly options contracts, often associated with elevated trading activity and shifting market flows.
Settlement Day — The date on which financial transactions, including Treasury bill issuance, are finalized and cash changes hands.
Spot-Down, Vol-Down Session — A market environment where stock prices fall while implied volatility also declines, which is relatively uncommon.
Treasury Bill Issuance — The process by which the U.S. Treasury sells short-term government debt securities to investors.
Treasury Yield Breakout — A move in bond yields above a significant technical resistance level, often signaling changing market expectations for rates or inflation.
VIX — The CBOE Volatility Index, commonly referred to as Wall Street’s “fear gauge,” which measures expected market volatility.

Disclosure

Stocks Trade Lower On Settlement Tuesday

Michael J. Kramer — Tue, 12 May 2026 16:01:51 GMT

Daily macro and market structure analysis—covering liquidity, options and gamma exposure, dealer positioning, and volatility—to help investors navigate price action across asset classes.

Technology Leadership Pushes Market Dispersion to Historic Extremes

Michael J. Kramer — Mon, 11 May 2026 21:43:53 GMT

Stocks finished the day mostly flat, with the S&P 500 up less than 20 basis points and the RSP down fractionally. However, this pushed dispersion in the index even higher. The Dispersion Index closed the day near 40.5, above its level prior to the mega-cap earnings reports, which is something I have not seen in recent memory.

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The move continues to be all about technology, with the XLK ETF outperforming the S&P 500 by 20.5 percentage points over the past 30 days. Meanwhile, every other major sector has underperformed the index over the same period.

On a five-year lookback, the gap between the SPX’s move and the average sector’s move is now in the 0th percentile. Just to make that clear: the zero percentile. The S&P 500 is up 16.4% over the past 30 days, but the average sector has only moved 9.5%. That gap has never been wider in five years. Tech is roughly 30% of the index and up nearly 37% — it alone is doing about two-thirds of the SPX’s move. Strip it out, and the rest of the market looks far weaker than the headline suggests.

The 10-year managed to push just barely above the downtrend today, although it was not the cleanest breakout one would want to see. Breaking out through a period of consolidation is not ideal and, in many cases, is not really a breakout at all.

In theory, for the 10-year to begin moving meaningfully higher from here, it likely needs to break above 4.45% and do so fairly quickly.

High-yield credit spreads have notably turned higher over the past couple of days, while the S&P 500 earnings yield has moved lower. That is a divergence worth watching because one of them is likely wrong. Given where dispersion is and how much technology has outperformed the broader S&P 500, my guess is that the S&P 500 is the one that is wrong.

Finally, the oil volatility index rose today and broke above two downtrend lines. If the OVX truly breaks out and continues higher from here, the party may be over.

In the meantime, the OVX-to-VIX ratio also broke below an uptrend line, which is certainly something worth watching.

–Mike

Glossary by ChatGPT

Dispersion Index — A measure of how differently stocks within an index are performing relative to one another.
Earnings Yield — A company’s earnings per share divided by its stock price, often used to compare equities with bond yields.
High-Yield Credit Spreads — The yield difference between lower-rated corporate bonds and comparable Treasury securities, reflecting perceived credit risk.
OVX — The CBOE Crude Oil Volatility Index, which measures expected volatility in oil prices.
OVX-to-VIX Ratio — A relative measure comparing oil market volatility expectations to broader equity market volatility expectations.
Percentile Rank — A statistical measure showing how a value compares to historical observations within a dataset.
Realized Dispersion — The actual observed variation in returns among stocks within an index over a specified period.
RSP — The Invesco S&P 500 Equal Weight ETF, which equally weights all constituents of the S&P 500.
S&P 500 — A market-capitalization-weighted index tracking 500 large publicly traded U.S. companies.
XLK ETF — The Technology Select Sector SPDR Fund, an ETF tracking large-cap U.S. technology stocks.

Disclosure

Gamma Squeeze Dynamics Continue to Fuel Semiconductor Mania

Michael J. Kramer — Mon, 11 May 2026 16:50:55 GMT

Semiconductor Market Rally Reaches Historic Extremes as Liquidity Starts To Tighten

Michael J. Kramer — Sun, 10 May 2026 13:09:32 GMT

Things started getting a bit ridiculous toward the end of last week. Say what you want, but the concentration in daily activity in the S&P 500 is increasingly centered around semiconductors. In fact, based on my internal estimates, Micron was the single largest contributor to the index move on Friday, followed by NVDA, AAPL, AVGO, AMD, INTC, TSLA, SNDK, AMAT, and QCOM.

When you dig a bit deeper, the options volumes going through stocks like Micron seem, frankly, pretty insane. Micron appears to be in the middle of a massive gamma squeeze, with implied volatility steadily rising, call volumes off the charts, and the stock price surging. The good news, at least potentially, is that this week is options expiration, which may give the market a chance to flush out some of the excess.

Technically, the stock looks beyond stretched, trading above its upper Bollinger Band, with an RSI of 84, and — get this — trading 157% above its 200-day moving average. Even in March 2000, Micron traded “only” 78% above its 200-day moving average.

The SOX index is also trading above its upper Bollinger Band, has an RSI above 70, and is trading nearly 60% above its 200-day moving average. The only other times the index traded this far above its 200-day moving average were in July 1995 and March 2000. Neither ended particularly well.

At this point, it seems clear to me, from both a technical and an options-market perspective, that there is a good chance these moves have not only become overextended but have entered the land of the absurd. Like Oracle rising 35% in a single day absurd. It is not as if the stock is even cheap, trading at nearly 5.5 times next-twelve-month sales estimates.

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This week, the Treasury will shift from paying down T-bills and injecting cash into the funding markets to becoming a net issuer of T-bills again, restarting the draining process. That begins with roughly $13 billion in bill settlements and another $42 billion in coupon settlements. Next week, T-bill issuance should ramp up significantly.

The paydown phase has treated the market fairly well. Coupon settlement days have generally been less favorable, though not disastrous. Net T-bill issuance days, however, have not been kind to the market since the reverse repo facility was effectively drained. Whether that relationship continues during this semiconductor mania remains to be seen.

Since the end of October, paydown days have seen the S&P 500 rise 64% of the time, compared with 52.4% for non-paydown days. Paydown days have also averaged gains of 59 basis points, versus 66 basis points on non-paydown days. However, on down days, paydown days have averaged losses of 47 basis points, versus losses of 66 basis points on non-paydown days.

Treasury bill settlement days, meanwhile, have seen the market rise only 24% of the time, compared with 62% for non-settlement days. Settlement days have averaged gains of just 50 basis points, versus 66 basis points on non-settlement days. More importantly, on down days, the S&P 500 has averaged a 94-basis-point decline on settlement days, compared with a 52-basis-point decline on non-settlement days.

–Mike

Glossary by ChatGPT

Advanced Micro Devices (AMD): A semiconductor company specializing in CPUs, GPUs, and AI computing solutions.
Basis Point: One hundredth of a percentage point, commonly used to describe changes in interest rates or market returns.
Bollinger Band: A technical analysis indicator using volatility bands plotted above and below a moving average.
Call Volume: The total number of call option contracts traded during a specific period.
Coupon Settlement: The settlement process for Treasury coupon-bearing securities, which can impact market liquidity.
Gamma Squeeze: A market event where rising stock prices force option dealers to buy additional shares to hedge exposure, accelerating gains.
Implied Volatility: The market’s expectation of future price fluctuations derived from option prices.
Intel (INTC): A semiconductor manufacturer focused on processors, data center chips, and computing technologies.
Moving Average: A technical indicator that smooths price data over a specified period to identify trends.
Micron Technology: A memory and storage semiconductor manufacturer heavily tied to DRAM and NAND markets.
Net T-bill Issuance: The amount of Treasury bills issued minus the amount maturing, influencing liquidity in funding markets.
NVIDIA (NVDA): A semiconductor company known for GPUs and AI-related computing hardware.
Options Expiration: The date on which options contracts expire and either settle or become worthless.
Paydown Days: Periods when Treasury debt reductions inject liquidity into financial markets.
Reverse Repo Facility: A Federal Reserve mechanism used to absorb excess liquidity from financial institutions.
RSI: Relative Strength Index, a momentum oscillator measuring the speed and magnitude of price movements.
S&P 500: A benchmark index tracking 500 large publicly traded U.S. companies.
Oracle: A technology company specializing in database software and cloud infrastructure.
PHLX Semiconductor Sector Index: A stock index tracking major semiconductor companies.
T-bills: Short-term U.S. Treasury securities with maturities of one year or less.
Technical Analysis: A method of evaluating securities using price patterns, indicators, and trading activity.

Disclosure

Why The Bond Market Thinks The Fed Will Look Through The Oil Shock

Michael J. Kramer — Sat, 09 May 2026 19:26:49 GMT

Saturday, May 9, 2026

Note: this is the free weekend recap. The thesis and macro framing are here in full; the granular options-positioning, individual-name setups, and weekly cross-asset levels live in the paid member commentaries.

Video

Tape Card

What’s New Today

April CPI Tuesday May 12 is the inflection — Headline expected at 0.6% m/m (down from 0.9%) and 3.7% y/y (up from 3.3%). Core expected at 0.4% m/m (up from 0.2%) and 2.7% y/y (up from 2.6%). Kalshi prediction markets and analyst consensus are aligned at the same numbers, so a clean in-line print isn’t pricing a major surprise. Levels: core 0.4% m/m / 2.7% y/y; headline 0.6% m/m / 3.7% y/y.
CPI swaps curve has May at ~4.2%, easing through the summer — the curve prices May at ~4.2%, June at ~4.0%, July at ~3.9%, and August at ~3.7%. The shape is heavily oil-dependent: if oil moves higher, the curve goes higher; if Iran simmers and Hormuz reopens, the curve flattens. Levels: May ~4.2% / Jun ~4.0% / Jul ~3.9% / Aug ~3.7%.

The decomposition tells you what the market believes about the Fed — Since the end of March, 10-year real yields have fallen, 10-year inflation expectations have risen, and nominal 10-year yields have gone roughly sideways. The decomposition is the tell: if the market believed the Fed would be aggressive on rates, real yields should be rising. They’re not. The market is willing to bet the Fed will look through this oil shock the way it looked through 2021.

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G-3 reaction-function divergence priced in — Markets have moved to price the ECB raising rates two to three times this year and the BOE the same. For the Fed, the market has just removed two or three previously priced cuts — no hikes priced in, just an end to easing. That’s a meaningfully different reaction function from the rest of the BOE and ECB.

Kevin Warsh transition is the wildcard on Fed policy — The market doesn’t know what Warsh’s first policy action looks like once he steps in. Pre-oil shock, his messaging was dovish-leaning, which may be feeding the market’s current read of Fed inaction.

What Changed From Last Week

DXY below the 100/101 inflection — The dollar has tested 100/101 multiple times and hasn’t been able to break through. Same level as last weekend, still unresolved. A hot CPI surprise or oil moving back up could be the catalyst. Levels: 100 / 101.

10-year still testing the multi-year downtrend at the 4.45 area — Last week, the 10-year tested the long-term downtrend from the October 2023 peak. This week it’s at the same area. A sustained break above 4.45 would be a meaningful trend shift and likely open the door toward the 5% area. The chart has a possible cup-and-handle look that supports that bias. Levels: 4.45 area / 5% upside if it breaks.

Oil-dollar correlation flipped since 2022, still holding — The classic textbook is “stronger dollar, weaker oil.” Since 2022, the relationship has flipped — higher oil and stronger dollar move together, lower oil with weaker dollar. Part of why the dollar has weakened slightly recently is that oil has weakened slightly. If oil starts moving back up, the dollar (and rates) likely follow.

Catalysts Ahead

Tuesday May 12 — April CPI report — The first major inflection point. In-line is the consensus path; a hotter-than-expected core, specifically, would be the surprise that could force the market to start re-pricing Fed reaction function assumptions.
Iran / Strait of Hormuz developments — Oil could move back above $100, toward $110, if overseas tensions escalate. If things simmer down and the Strait reopens, oil could move into the $70s. That ambiguity is what makes the inflation-curve assumption (a May 4.2% peak, then easing) the highest-uncertainty part of the setup. Levels: oil $70s downside / $100 / $110 upside.

Commentary

Transcript Edited by Claude (Can Make Mistakes)

Why This CPI Report Matters

This week we’re going to get April CPI on Tuesday the 12th. This is going to be a fairly important CPI report, only because of how inflation expectations have been coming together over the last two months — with the war and how oil prices have been impacting things.

If you look at real rates and inflation expectations versus nominal rates right now, it appears the market is pricing in a much more dovish Fed — one that’s not going to be responding to higher inflation rates. That could even be one of the reasons we’ve seen equity markets rebound so sharply. The market is trying to get ahead of what will be another inflation cycle with the Fed potentially not doing anything.

We’re going to take a look at the things you need to watch in order to determine whether that’s true for yourself.

What The Numbers Look Like

Let’s start with what we’re looking for. We’re looking for a 0.4% increase month-over-month on core CPI versus estimates of 0.2%. Year-over-year is expected to rise to 2.7% from 2.6%. Headline CPI is expected to rise 0.6% m/m, down from 0.9%, while year-over-year is expected to jump to 3.7% from 3.3%.

I also like to look at Kalshi. They’ve done a very good job in the past of predicting inflation rates, and they sometimes give us a good sense of whether betting markets are expecting hotter or cooler numbers than analysts. Right now, on core CPI year-over-year, Kalshi is looking for 2.7%. On core month-over-month, 0.4%. On headline, 0.6% and 3.7%. So Kalshi and analysts are looking for the same numbers — based on this, we shouldn’t really be expecting any major surprises.

More importantly, when you take a look at the US CPI inflation curve, the picture is interesting. We’re looking for 3.7% in April — but inflation is expected to jump to around 4.2% in May, and then slowly start coming back down: 4.0% in June, 3.9% in July, 3.7% in August.

The only problem with this projection is that it’s really going to be based on where oil goes. If oil prices start going higher again, that’s obviously going to have a big impact on where inflation expectations are — and right now oil’s been chopping sideways. If things develop overseas, oil could move back above $100 and toward $110. If things simmer down and the Strait of Hormuz reopens, oil could move all the way down into the $70s. We don’t really have a sense of what’s likely to happen at this point.

Oil, The Dollar, And Rates

When you compare oil prices to the dollar, there’s a pretty strong correlation over the years — but not the one most people expect. Normally we think “stronger dollar, weaker oil.” That just hasn’t been the case. In fact, it’s been the opposite since 2022, when things kind of flipped: higher oil with stronger dollar, and that relationship has held since.

Part of why we’ve seen the dollar weaken some is because oil prices have weakened some. It probably also has to do with the fact that oil is heavily tied to interest rates. The 10-year rate has moved with oil prices in the past, and so if oil prices start moving higher, you’re likely to see interest rates moving higher. The same is true of the 2-year. It’s a similar dynamic.

This is one of the reasons why, if you look at the technical charts on things like the dollar, we’re at a fairly important inflection point. The dollar has gotten to the 100, 101 level on a couple of occasions and hasn’t been able to break through. If we were to get a number that was slightly hotter than expected, or if oil prices started moving up again, the dollar could try to challenge 100 — maybe even break through.

On the 10-year, there’s more at stake. The 10-year rate has been in a multi-year consolidation phase after the huge move from 2020 to 2022. If we were to see it break out above the 4.45 area, that would really be a pretty big shift in trend. It would open the door toward the 10-year moving back toward 5% or so. When you look at the chart, you can kind of make out what looks like a cup-and-handle pattern, also suggesting that the 10-year may be biased to move higher.

How The Central Bank Reaction Functions Have Diverged

A lot of the change we’ve seen — with oil higher — has shifted expectations around central banks. The market has moved to price an ECB now likely to raise rates by as many as two to three times. The BOE is also looking at two to three rate hikes. The Fed, on the other hand — the market has just removed two or three rate cuts. No hikes priced in, just the end of the easing cycle.

So you’re clearly seeing a different reaction function priced for the BOE and the ECB versus the Fed. The market thinks the Fed is going to be more willing to look through the impacts of higher inflation due to higher oil prices.

The Decomposition Tells You What The Market Believes

One of the reasons I’ve come to that conclusion: if you look at the current charts of a 10-year CPI swap, a 10-year real rate, and a 10-year nominal rate side by side, what you see is pretty interesting.

Since the end of March, real rates have actually come down. Inflation expectations have actually gone up. Nominal rates have for the most part gone sideways.

This is really meaningful, because of how a real rate is constructed. You get the real rate by taking the nominal rate and subtracting the inflation expectation. You can also flip it: the inflation expectation is the nominal rate minus the real rate. In this case I’m looking at it as nominal rates minus inflation expectations.

What’s very clear is that the market is willing to bet the Fed is going to look through this inflation, and that the Fed is not likely to respond at this point. The reason: during this period, the real rate has come down, the inflation expectation has risen, and the nominal rate has barely moved. If the market truly believed the Fed was going to be aggressively raising rates, we should be seeing real rates moving up — meaning the 10-year nominal would be rising at a faster clip than the inflation expectation. That’s not happening yet.

If we were to get a hot inflation report — specifically on core — it could actually cause the market to start rethinking this.

The Kevin Warsh Wildcard

Part of the reason we’re in this setup is that we’re in a transition phase. We don’t really know what Kevin Warsh is going to do as his first policy action once he steps into the role. We know what Jay Powell would have probably done, but we don’t know what Warsh is going to do.

If you base it off what we’ve heard him say prior to the oil shock, it was a much more dovish tilt. That could be part of the thinking you’re seeing in markets overall — basically the bet that the Fed is going to look through this, that the oil shock is more transitory, something that would just fade.

But we don’t know how long oil’s going to stay up, and we don’t really know what the true impacts are going to be — because we haven’t seen inflation come back to target in a number of years.

Hope you found this helpful. We’ll see you again next week.

Defined Terms

CPI (Consumer Price Index) — The Bureau of Labor Statistics’ monthly inflation report. Headline is the all-items measure; core excludes food and energy.
CPI Swaps Curve — The market for zero-coupon inflation swaps that prices the implied year-over-year CPI rate by month. The shape of the curve reflects what traders expect each month’s inflation print to be.
Real Rate (10-Year TIPS) — The yield on inflation-protected Treasuries; effectively the inflation-adjusted return on a 10-year bond.
Inflation Expectations (5-Year) — Market-implied expected average inflation over the next five years, derived from the spread between nominal Treasuries and TIPS, or directly from inflation swaps.
Nominal Rate — The stated yield on a Treasury bond, before adjusting for expected inflation. The 10-year US Treasury rate is the reference benchmark.
Kalshi — A regulated US event-trading exchange. Its CPI prediction market aggregates trader bets on the next print, often providing a directional read on consensus.
Cup and Handle Pattern — A technical chart pattern in which a security trades down, recovers (forming the “cup”), pulls back modestly (the “handle”), and then trades higher. A pattern descriptor, not a recommendation.
Reaction Function (Central Bank) — The implicit rule the market believes a central bank uses to set policy in response to economic data. Different reaction functions for the Fed, ECB, and BOE imply different rate paths even when facing similar shocks.
Strait of Hormuz — The strait between the Persian Gulf and the Gulf of Oman through which roughly 20% of global oil supply transits. Disruptions are a major upside risk to oil prices.
Look Through (Monetary Policy) — When a central bank chooses not to respond to a temporary supply-driven inflation shock, treating it as transitory. The 2021 episode is the most recent reference point for this approach.

Disclaimer

Liquidity Tailwind Closes As The Regime Data Argues The Drain Could Bite

Michael J. Kramer — Fri, 08 May 2026 16:53:23 GMT

Daily macro and market structure analysis—covering liquidity, options and gamma exposure, dealer positioning, and volatility—to help investors navigate price action across asset classes.

Negative Real Wage Growth Looms As Gasoline Outruns Oil - Advanced Topics

Michael J. Kramer — Fri, 08 May 2026 13:54:09 GMT

The Impacts Of Treasury Bill Issuance On The S&P 500

Michael J. Kramer — Fri, 08 May 2026 11:56:27 GMT

The Impacts Of Treasury Bill Issuance On The S&P 500

The reported data breaks down into three distinct liquidity regimes, and the message is becoming increasingly clear: the buffer that once insulated markets from Treasury funding pressures is gone, and the drain is now hitting markets directly.

From roughly June 2023 through October 2025, the reverse repo facility acted as a shock absorber for Treasury bill issuance. As the Treasury increased the supply of bills, money market funds steadily rotated cash out of the RRP and into Treasury bills. That shift effectively funded issuance without materially reducing reserve balances or tightening broader financial conditions. In other words, the market was able to absorb a large increase in bill supply with relatively little visible stress.

Small Cap Narrative Faces a Reality Check

Michael J. Kramer — Thu, 07 May 2026 21:15:59 GMT

Stocks finished the day lower, with small caps taking the biggest hit. There has been plenty of commentary on social media suggesting that small-cap outperformance is evidence of broadening market breadth. Apparently, very few have actually bothered to look at the holdings, let alone the top 10 holdings. When Bloom Energy is the largest holding, alongside companies tied to AI infrastructure, data centers, power demand, networking, and electrification themes, it becomes pretty clear this is still the same trade driving much of the market higher.

If you look more closely, many of these companies are the very same AI-related trades currently driving Semis and large-cap Tech more broadly. By the second page of holdings, there is even more Information Technology exposure.

The point is that claiming small caps are proof of broadening breadth, without understanding what is actually in the basket, misses the bigger picture. In many respects, it is still the same thematic trade expressed through a different part of the market. Anyway, IWM printed a bearish engulfing candle today, with the ETF falling 1.6%.

Much of it was probably driven by the roughly 10% decline in Bloom Energy — clearly a completely “unrelated-to-AI” stock — which had rallied more than 100% since March 30.

If you are a Japanese official hoping USD/JPY would respond to intervention, you are not feeling very good these days. Despite what appear to have been two rounds of intervention, USD/JPY has still been unable to move sustainably below 155. At this point, you have to wonder whether they attempt another intervention to defend that level. If not, it increasingly feels like USD/JPY could be headed significantly higher.

Finally, I almost forgot there was a jobs report tomorrow. Apparently, the market did too, because the 1-day VIX closed at 12.4. That does not exactly look like a great setup for a volatility crush from here.

Glossary by ChatGPT

AI Infrastructure — The hardware, software, networking, and power systems required to support artificial intelligence workloads and data processing.
Bearish Engulfing Candle — A technical chart pattern where a larger down candle fully covers the prior up candle, often signaling potential downside reversal.
Broadening Market Breadth — A market condition where gains are supported by a wider range of stocks or sectors rather than a narrow group of leaders.
Data Centers — Facilities that house computing infrastructure used for data storage, networking, and cloud or AI processing workloads.
Electrification Themes — Investment trends tied to increased electricity usage and infrastructure expansion across industries and technologies.
ETF — Exchange-traded fund; a basket of securities that trades on an exchange like a stock.
Information Technology Exposure — The degree to which a portfolio or index is invested in technology-related companies.
Intervention — Direct action by a central bank or government to influence currency markets or exchange rates.
IWM — The ticker symbol for the iShares Russell 2000 ETF, commonly used as a benchmark for U.S. small-cap stocks.
Market Breadth — A measure of how many stocks participate in a market move, often used to assess the strength of a trend.
Semis — Industry shorthand for semiconductor companies and related chip manufacturers.
USD/JPY — The currency pair representing the exchange rate between the U.S. dollar and Japanese yen.
VIX — The CBOE Volatility Index, commonly referred to as Wall Street’s “fear gauge,” which measures expected market volatility.
Volatility Crush — A rapid decline in implied volatility, often occurring after a major market event or data release.

Disclosure

Liquidity Proxies Begin To Crack As The Drain Calendar Hardens

Michael J. Kramer — Thu, 07 May 2026 18:24:37 GMT

Daily macro and market structure analysis—covering liquidity, options and gamma exposure, dealer positioning, and volatility—to help investors navigate price action across asset classes.

Narrow Tech Leadership Continues as Oil and Rates Fall

Michael J. Kramer — Wed, 06 May 2026 21:09:04 GMT

Michael Kramer and the Clients of Mott Capital Own AMZN and MSFT

Oil fell sharply on headlines suggesting another potential deal may be in the works. The reports sounded very similar to previous negotiations, but regardless of whether the news ultimately proves true or false, perception often becomes reality in markets. The headlines sent oil prices plunging and helped push risk assets higher.

More interesting, however, is that the Technology sector has been the only major sector to outperform the S&P 500 over the past 30 days, and by a wide margin — nearly 12.5 percentage points. Every other major sector has lagged the broader market’s returns.

The largest holdings in the XLK remain Nvidia, Microsoft, Apple, Broadcom, Micron, and AMD. That creates an increasingly narrow market leadership structure. Either the rest of the market will need to rally significantly over the coming weeks to broaden participation, or there is a reasonable chance the large-cap technology names will begin to correct lower.

The realized dispersion measure I track is currently estimated at roughly the 0th percentile over the past five years, suggesting this level of narrow leadership and low dispersion is unlikely to persist indefinitely.

Meanwhile, rates fell sharply, helped by declining oil prices and a quarterly refunding announcement that ultimately proved to be a non-event, with any meaningful increases in coupon issuance still some time away. At least for now, the breakout in the 10-year yield above its multi-year downtrend line has failed, with yields falling back below that level today.

AMD cleared the call wall area of resistance, helping propel the shares higher. Again, the options market can provide insight into, and a better understanding of, the key levels needed for a stock to rise or fall following earnings results. AMD’s results and commentary were clearly good enough, at least for today, to push the stock higher.

Meanwhile, ARM reported results that did not appear nearly as strong as AMD’s, yet the stock is still trading higher. That’s particularly interesting because I thought Palantir delivered better results on both the earnings beat and guidance, yet the stock sold off sharply.

The broader point is that Meta, Microsoft, Amazon, and Palantir all declined after earnings, largely as the options market had suggested, while Lilly rose, also as anticipated. So far, AMD has been the notable exception, and we likely will not know how ARM ultimately trades until tomorrow.

This is why understanding how options are positioned heading into any major event is so important.

Anyway, who knows what tomorrow’s headlines will bring.

-Mike

Glossary by ChatGPT

Call Wall: A price level with significant call option open interest that can act as resistance for a stock.
Coupon Issuance: The process by which the U.S. Treasury issues interest-bearing debt securities to investors.
Dispersion: A measure of how differently stocks within an index are performing relative to one another.
Downtrend Line: A technical analysis line connecting lower highs that indicates a declining trend.
Earnings Beat: When a company reports earnings above analyst expectations.
Options Positioning: The distribution of options contracts that can influence price movement and volatility.
Quarterly Refunding Announcement: A scheduled U.S. Treasury update outlining upcoming government debt issuance plans.
Realized Dispersion Measure: A statistical measure tracking the actual variation in returns among stocks over a given period.
Risk Assets: Investments such as equities or commodities that typically perform better during periods of economic optimism.
Sector Leadership: The market segments driving the majority of index performance.
XLK: The Technology Select Sector SPDR Fund, an ETF tracking large-cap U.S. technology stocks.

Disclosure

Liquidity Drain Set To Begin as Treasury Issuance Picks Up

Michael J. Kramer — Wed, 06 May 2026 17:48:08 GMT

Daily macro and market structure analysis—covering liquidity, options and gamma exposure, dealer positioning, and volatility—to help investors navigate price action across asset classes.

Reading a Regime Setup — NDX and the Vol Compression

Michael J. Kramer — Wed, 06 May 2026 14:13:35 GMT

Equity Volatility Disconnect Deepens

Michael J. Kramer — Tue, 05 May 2026 23:04:22 GMT

SPY volume was lower than on the day after Thanksgiving. At least based on the data I have, total volume was just 35.9 million shares. Christmas Eve, a half day, saw 39.5 million shares traded, Friday, November 28, a half day saw 49.2 million shares, and even July 3 saw 51 million shares traded. The only day that saw lower volume, from what I can see, was April 27, with 33.1 million.

Hard to say where it has gone, but options volume hasn’t really increased meaningfully, so it hasn’t gone there. So I don’t know, it is strange.

Volatility from a VIX standpoint appears to be bottoming out, and that ratio between oil vol and the VIX remains very wide at more than 4.

What is odd about this whole thing, regarding volatility, is that the ratio between oil and gold volatility is not nearly as wide. In fact, the ratio of oil to gold is only 2.8, so why do gold and oil have a historically aligned ratio, but the S&P 500 and oil do not?

Clearly, oil and gold vol are elevated, and S&P 500 vol is not.

I can also say that, even more recently, the MOVE has started to push higher, while S&P 500 volatility has been falling.

It is the same when you look at the relationship between SPY and HYG, which is a good enough indicator of the relationship between the equity and credit markets.

You can just look at the top movers to see that today’s index rise was mostly driven by semis, with Micron, Intel, Broadcom, AMD, Lam, and Qualcomm among the top 10 movers by weighting. This tells you a lot about how the moves are made up and why things are being separated and moving apart from one another.

We have also seen what is likely to be the peak in dispersion, and so my sense is that all of the divergence will converge at some point; which way they converge is another question.

–Mike

Glossary by ChatGPT

Dispersion — A measure of how differently individual stocks or sectors are performing relative to one another within the broader market.
HYG — The iShares iBoxx High Yield Corporate Bond ETF, commonly used as a proxy for the high-yield credit market.
MOVE Index — An index that measures implied volatility in the U.S. Treasury market.
SPY — The SPDR S&P 500 ETF Trust, a widely traded ETF tracking the S&P 500 Index.
VIX — The CBOE Volatility Index, often referred to as the market’s “fear gauge,” measuring expected S&P 500 volatility.

Disclosure

Equity Volatility Disconnect Deepens

Michael J. Kramer — Tue, 05 May 2026 23:03:42 GMT

Daily macro and market structure analysis—covering liquidity, options and gamma exposure, dealer positioning, and volatility—to help investors navigate price action across asset classes.

One Last Pay-Down Boost Before The Bill-Issuance Drain Begins

Michael J. Kramer — Tue, 05 May 2026 17:09:42 GMT

Daily macro and market structure analysis—covering liquidity, options and gamma exposure, dealer positioning, and volatility—to help investors navigate price action across asset classes.

Reading a Geopolitical Setup — Oil Through the Iran Cycle

Michael J. Kramer — Tue, 05 May 2026 11:37:03 GMT

Reading a Geopolitical Setup — Oil Through the Iran Cycle

Geopolitics is the unscheduled catalyst. Where a central bank decision arrives on a date the market has been waiting for — with positioning, expectations, and pricing all built around the calendar — a geopolitical shock arrives without warning, and the chart finds out at the same time everyone else does.

That changes how the framework operates. Not the steps. Not the discipline. The inputs and the asymmetry. The macro question shifts from “what does the central bank believe about inflation” to “what is the headline risk this week, and what does the option market say about it.” And invalidation shifts from a hawkish surprise to a single ceasefire headline that gaps the chart in three minutes.

Oil through the Iran cycle is the cleanest current demonstration.

What makes an oil setup different

The catalyst arrives without permission. A central bank tells you when it will speak. The news cycle does not. A drone strike, a tanker incident, a ceasefire rumor — any of these can move oil 5% in an afternoon. That removes the luxury of pre-positioning into a known event. The job becomes about staying ready for any of several plausible catalysts, not preparing for one.

Implied volatility is the macro signal. In FX, the rate differential tells you which way the structural wind is blowing. In oil during a geopolitical cycle, the OVX — the CBOE Crude Oil Volatility Index — tells you the same thing in a different language. Rising OVX is the market paying up for protection, expecting the regime to continue or escalate. Falling OVX is the market unwinding of that protection, which creates an asymmetry: positioning is thinner, so the next escalation headline lands harder.

The levels are wider but no less precise. In FX, a 2% move is a meaningful day. In oil during a geopolitical cycle, 5% can happen on a single headline, and 10% can happen on a weekend. The technical levels are still real — still tested, still respected, still the points around which price organizes. The amplitude shifts. The structure does not.

Reading the Brent setup, mid-April

Going into the back half of April, here is what the thesis would have produced for Brent — built off the analysis published on 15 April. This is presented as an illustrative walkthrough of methodology, not a recommendation.