What Members Are Reading About Oil’s Surge, Settlement Drains, and the Liquidity Stress Building
Here’s What We Covered This Week
Monday opened with a sharp overnight sell-off, but the vol crush played out — the one-day VIX fell from 19 to 13, and the S&P rebounded as dealers bought into the recovery. Our weekend gamma model showed 6,900 as the level needed to flip back into positive gamma, but the index could not reach it. Settlement flows added volatility, rates surged globally, and cross-currency basis swaps began to tighten — early signs of liquidity stress building through the week.
By Tuesday, the S&P had gapped below 6,800 and filled the December 18 gap at 6,718. The index remained in negative gamma, amplifying moves in both directions. Credit spreads began widening across investment-grade and high-yield, and our CTA model flagged 6,855 as the medium-term flip level, putting the market right on the edge.
Wednesday, a non-settlement day, brought relief. Bitcoin rallied 7% and the S&P filled Monday’s gap, but the move stalled at the 6,880–6,900 call wall, right where the gamma model suggested. Oil pressed against $77.50 resistance.
Thursday’s settlement day followed the script. The VIX rose 12.5%, consistent with our data showing volatility rising on most settlement days. The TGA near $860 billion is projected to exceed $1 trillion by tax season, implying up to $200 billion in additional reserve drawdowns. Oil broke higher, the CTA model showed crude positioning at full strength, and rates repriced sharply, pushing December 2026 Fed funds futures to 3.29%.
Friday brought convergence. Oil surged to $91, credit spreads widened to November levels, and cross-currency basis swaps tightened across major currencies — a sign that dollar liquidity is deteriorating. The rotation trade broke down, small caps and financials weakened, and staples lost leadership. The jobs report sealed it: payrolls fell by 92K, and unemployment rose to 4.4%, reinforcing the stagflationary setup heading into next week’s CPI.
Members of Navigating the Market had the framework for these moves — the gamma levels, settlement calendar, CTA triggers, and credit spread signals. Here’s what we covered and what members are watching next:
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Disclaimer
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.