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Stocks rose sharply on Wednesday, only to give it all back by day’s end, basically finishing flat compared to Tuesday’s highs. Despite all the back and forth in the stock market, there’s essentially nothing happening for the third straight day. The 20-day moving average has continued to be a problem area for the S&P 500. I can’t really say what happens in a market this choppy heading into an OPEX date, other than the fact that 6,700 appears to be the short-term call wall and 6,500 is the put wall.
The pattern in the S&P 500 intraday chart resembles a head-and-shoulders formation, which would suggest a drop back to the lows of the day on Tuesday for Thursday. If that’s the case, then fine. If not—well, then I got one wrong this week.
More importantly, there was significant liquidity strain in the market, and I’m not sure it will improve on Thursday with another Treasury settlement date coming up. About $40 billion has been settled, and another $23 billion is set to settle on Thursday. On Tuesday, there was already a $29 billion settlement.
This pushed the average DTCC repo rate to 4.32%, which is well above the upper end of the Fed’s effective funds rate and above the rate on the standing repo facility, at 4.25%. Transaction volume also reached nearly $85 billion — the highest level since June.
The elevated repo rate sent $6.75 billion into the standing repo facility this morning, marking the highest volume at the facility since June 30.
Gold implied volatility levels rose to 27.1 — the highest since April 2025, and comparable to peaks seen in March 2022, August 2020, March 2020, and February 2016. The outcomes for gold following those periods were generally not good. At this point, it’s very much a momentum and speculative trade.
Additionally, gold has a history of rising by 100% of the previous trend. If so, then we are pretty much there.