Stocks fell sharply on Thursday, with the dropping nearly 1.6% and the declining more than 2%. Thursday was also a settlement day, with $22 billion settling, so the sell-off wasn’t particularly surprising. Since the end of October, settlement days have been weak more often than not.
Next week may not be any better, with $65 billion due to settle on Tuesday, and another $24 billion on Thursday.
Suddenly, social media has decided that dispersion in the index is a problem, as stocks are starting to break down and post large moves. It’s a bit of a “no kidding” moment — where has everyone been for the past six months? I guess people are just now waking up.
The Dispersion Index has been trading near the upper end of its historical range for several weeks, so this is hardly a new development.
I don’t want to point out the obvious, but Walmart (NASDAQ:) is reporting results next, and this whole little spot-up, vol-up stuff is probably going to end in a not-so-pleasant way.
Last year, when this same thing happened, the stock fell 12.5%.
With the closing at 21.5, it wouldn’t be surprising to see the S&P 500 rally by around 1%. At these elevated IV levels, a sharp downside move in the SPX would be somewhat unexpected.
In addition, today is Friday and the start of a holiday weekend, which is often a period when volatility sellers step in, potentially adding support to the market.
