Chutes and Ladders on Wall St., Nvidia in Texas & Why a 'Death Cross' May Be ... Good
Let's find the rules of this erratic market game we've been playing, why Nvidia's coming to the Lone Star State and what a 'Death Cross' could really mean.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
It feels like a game of Chutes and Ladders. ... The back-and-forth movement in price discovery on Monday was, in a way, a microcosm of what we have seen on a day-to-day basis of late. While, in Monday's morning's column, we illustrated a series of lower-highs for the S&P 500 going back to late March and a series of higher-lows going back to early April, the day-to-day and intraday results have been wildly erratic, correctly and finally pointed out by the financial media as a result of both electronic, high-speed, algorithmic trade and "zero days to expiration" or "0DTE" (options that expire at the conclusion of the current trading day, every day).
This kind of options contract has only been in existence five days a week since 2022, with trading primarily focused upon the S&P 500, Nasdaq 100, Invesco QQQ ETF QQQ and SPDR S&P 500 ETF Trust SPY. The primary use for these trading vehicles due to their rapid deterioration in premium, has been either to get rich quick or hedge large positions. The flipside of that has been that this has, on volatile days, caused something of a mini gamma squeeze as dealers take and liquidate appropriate positions in the underlying securities as a means toward increasing and decreasing protection as prices move.
Gamma is a concept in options trading that many traders don't quite understand. Gamma, quite simply, represents the rate of change in an option’s delta relative to the price movement of the underlying asset. Now, delta measures how much an option’s premium is expected to move per $1 change in the underlying asset’s price. Gamma indicates how much the delta will change as that asset’s price fluctuates. Elevated values for gamma suggest that an option’s delta is highly sensitive to volatility (expressed for the underlying asset as beta), which can lead to significant shifts in that option’s value.
I know. It's a lot. Many who do something else occupationally may just gloss over, but this is impacting you. This is why markets are so much more volatile in 2025 when keyword reading algorithms react to news items than they were just ten or fifteen years ago. Could we ever slow down this volatility by reintroducing human traders and the old auction market model to the process of price discovery?
I really don't ever see the large brokerage houses or investment banks ever going back to using human traders or allowing for a true auction. For the powers that be, that would be adding a lot of overhead in salaries, bonuses and benefits, not to mention infrastructure. The broker-dealers were quite glad to rid themselves of these costs years ago. Now, the public pays the price of a less stable marketplace, while new and incredibly stupid methods of risk-taking continue to be created.
Monday Funday
Equities shot out of the gate on strength on Monday morning in response to weekend news that Pres. Trump had shown some flexibility in dealing with the semiconductor and other high-tech industries by exempting them from the burden of the reciprocal tariffs, even in temporary, even if imported from China. The president would speak on Monday and added that some kind of relief from tariffs could be on the way for auto manufacturers.
Still markets gyrated between those gains and completely giving back those gains throughout the morning hours as traders still felt inclined to take short-term profits. However, the president was not the only public official who was out and about for the day and what was said by others was supportive of risk asset prices.
Fed Gov. Christopher Waller...
I told readers on Monday that Christopher Waller was set to speak publicly and was the highest-profile speaker of the day as a permanent holder of FOMC voting rights. I did not expect such positive (for markets) direction on both inflation and interest rates. Waller commented...
"I am saying that I expect that elevated inflation would be temporary, and 'temporary' is another word for transitory. (Still can't believe he went there.) Despite the fact that the last surge of inflation beginning in 2021 lasted longer than I and other policymakers initially expected, my best judgement is that higher inflation from tariffs will be temporary."
On policy, Waller added...
“If the (economic) slowdown is significant and even threatens a recession, then I would expect to favor cutting the (FOMC’s) policy rate (Fed funds rate) sooner, and to a greater extent than I had previously thought.”
Trading Places
The Wall Street Journal reported that Treasury Secretary Scott Bessent was prioritizing South Korea, the U.K., Australia, India, and Japan as being among his "top targets" for putting together new trade agreements. On top of that, National Economic Council Director Kevin Hassett appeared on CNBC and said that nearly every nation on earth has called the current administration in an effort to initiate trade talks and that more than 10 countries had already made what he called "amazing" offers.
Marketplace
U.S. Treasury debt securities rallied alongside equities on Monday. The U.S. .Ten-Year Note paid 4.37% by day's end, down 12 basis points, while the U.S. Two-Year Note yielded 3.84%, also down 12 bps for the session. Overnight, these yields have backed up slightly.
As for equities, the broader marketplace outperformed the major indexes. The S&P 500 and Nasdaq Composite gained 0.79% and 0.64% for the day, while the Dow Transports, S&P Midcap 400 and Russell 2000 all gained at least 1.11%. Interestingly, the Philadelphia Semiconductor Index lagged behind on a day partially driven by tech news, gaining just 0.31%. This was at least partially due to the underperformance of Marvell Technology MRVL and Broadcom AVGO. Those two names were down 2.1% and 2% on Monday in that order.
Breadth
All 11 S&P sector SPDR exchange-traded funds closed out the day in the green. Interestingly, the four defensive sectors took the top four slots on the daily performance tables despite Monday being an "up "day, as the REITs XLRE and Utilities XLU led the pack. Growth and cyclical sectors lagged behind, but even the Discretionaries XLY, while finishing the day in last place, gained 0.29%.
Winners beat losers by almost precisely 4 to 1 at the NYSE and by a rough 5 to 2 at the Nasdaq. Advancing volume took a 78.6% share of composite Nasdaq-listed trade and a 77.9% share of composite NYSE-listed activity. So, have we finally confirmed an upward change in trend? Almost. Maybe...
The deal is this: Aggregate trade across Nasdaq-listed securities increased by 2.3% on a day-over-day basis. Halfway there? Exactly. Trading volume ebbed a bit across the membership of the S&P 500 and across NYSE-listings. Hence, we do not have a full confirmation.
'Death Cross' for S&P 500
We had a "death cross" for the S&P 500 -- its first in three years. A "death cross," for the new kids, is when the 50-day simple moving average crosses below the 200-day simple moving average. This is the opposite of a "golden cross" and is supposedly a negative sign. That said, I have not yet seen an algorithmic reaction, and the data going back and looking at past "death crosses" seems inconclusive to even positive.
Joe Adinolfi at MarketWatch, published a piece on Monday afternoon that showed a table tracing the last 20 S&P 500 death crosses and what the index had done over various time frames going forward. That table dates back to 1981. One week later, the index was up 55% of the time for a median gain of 0.6%. Three months later, the index was up 75% of the time for a median gain of 4.8% and one year later, the index was positive 80% of the time for a median gain of 11.2%. So much for death crosses.
Moving to America?
On Monday, elite chip designer Nvidia NVDA announced plans to produce new supercomputers that will power generative artificial intelligence with contract manufacturers in the state of Texas. A Nvidia spokesperson declined to comment on the plan. But both Nvidia and key competitor Advanced Micro Devices AMD are expected to have moved or will move some of their chip manufacturing capacity from Taiwan to the state of Arizona, while sticking with Taiwan Semiconductor TSM as the contract foundry.
Taiwan Semiconductor has already started producing Nvidia's highest-end Blackwell chips in Arizona, while Nvidia works with Amkor AMKR on semiconductor packaging and testing operations, also in that state.
On Tuesday morning, news broke that Advanced Micro Devices would start manufacturing its next-generation EPYC processors on advanced 2nm technology at the Taiwan Semiconductor facility in Arizona as well. Is all of this a lot? Not yet. What it is, is a start.
Economics (All Times Eastern)
08:30 - Export Prices (Mar): Expecting 1.1% m/m, Last 0.1% m/m.
08:30 - Import Prices (Mar): Expecting 0.1% m/m, Last 0.4% m/m.
08:30 - Empire State Manufacturing Index (Apr): Expecting -17.2, Last -20.0.
08:55 - Redbook (Weekly): Last 7.2% y/y.
4:30 p.m. - API Oil Inventories (Weekly): Last -1.057M.
The Fed (All Times Eastern)
11:35 - Speaker: Richmond Fed Pres. Tom Barkin.
7:10 p.m.- Speaker: Reserve Board Gov. Lisa Cook.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: ACI (.41), BAC (.81), C (1.85), ERIC (1.00), JNJ (2.58), PNC (3.39)
After the Close: JBHT (1.15), UAL (.74)
At the time of publication, Guilfoyle was long AMD equity.
