Why this signal means the S&P 500 is running out of steam, Wall Street strategist says

Another event being keenly monitored by investors pertains to the recent GameStop GME, -26.21% frenzy, which has led to wild swings for stocks, including that videogames retailer and the cinema chain AMC Entertainment AMC, -13.06%, through users on Reddit’s WallStreetBets forum.

Treasury Secretary Janet Yellen is due to hold a meeting with the heads of the Securities and Exchange Commission, Federal Reserve Board, Federal Reserve Bank of New York, and Commodity Futures Trading Commission to discuss the recent volatility.

U.S. stocks climbed, with the Dow gaining 280 points and the S&P 500 up 0.7% in morning trading.

In our call of the day, Michael Kramer of Mott Capital Management said U.S. stocks may be at the top end of the range with no more room to rise.

Kramer made the call after the Cboe Volatility Index (VIX) VIX, -2.10% fell more than 10% on Wednesday, closing at 22.9. The index is a closely watched measure of expected stock market volatility.

“It is stunning to me how quickly the VIX has fallen, given the lack of a move higher the S&P 500 has seen,” he said. Kramer noted that on Nov. 3 the VIX was at 35.6 before taking 10 days to fall to 23, but this time around it has fallen from 37 to 23 in just six days. November’s VIX fall saw the S&P 500 rise more than 8% in the 10-day period, but the index has in comparison climbed just 3.3% this time. “Very different positioning in the market, I guess,” he added.

“If the VIX is already at the bottom of the range, which as we have talked about in the past, is around 21 to 23, then the S&P 500 will not have enough energy to push it [to] new highs,” Kramer said.

The S&P 500 closed 0.1% higher on Wednesday but Kramer said when broken down, it wasn’t a good day for the index, and in fact raised some concerns. “It actually wasn’t a strong day at all because the index reached 3,848 at the high, officially closing the gap from last week, and essentially turned lower as it finished at 3,830.

“The gap-fill and the reversal could be a sign of trouble depicting what likely starts a gap fill lower on the SPX back to 3,785,” he said.

The chart

This chart from the Financial Times shows that the number of vaccine doses administered globally has reached the number of confirmed COVID-19 cases worldwide.

The markets

U.S. stocks climbed in early trading following better-than-expected jobs data. futures European stocks also climbed as a number of corporate earnings sparked optimism over the recovery. Asian markets retreated overnight, however, as caution began to set in.

The buzz

Genetic testing company 23andMe is going public via a merger with Richard Branson’s special purpose acquisition (SPAC) VG Acquisition Corp VGAC, +8.39%, in a deal with an enterprise value of about $3.5 billion, the companies said on Thursday.

Elon Musk’s Twitter TWTR, +1.52% break didn’t last long. The cryptocurrency dogecoin surged more than 45% early on Thursday after the Tesla chief executive tweeted one word: “doge.”

In an extraordinarily candid interview with engineering consultant Sandy Munro that aired on YouTube, Musk advised against buying a Tesla TSLA, -1.03% during a production ramp-up, agreeing with some criticism of the vehicles.

Nokia NOKIA, -2.30% NOK, -7.45% stock slipped in early trading, as the telecoms giant beat profit expectations in the fourth quarter but warned 2021 would be a challenging year, with revenues expected to fall to between €20.6 billion and €21.8 billion from €21.9 billion in 2020.

Oil major Royal Dutch Shell RDSA, -2.01% RDS.A, -1.19% swung to a loss in the fourth quarter and its underlying performance was worse than expected.

Technology giant Apple AAPL, +1.64% is close to a deal with car maker Hyundai-Kia to make an Apple-branded autonomous electric vehicle, CNBC reported late on Wednesday.

PayPal’s PYPL, +5.38% profits tripled in the fourth quarter, fueled by accelerated adoption of digital payments during the COVID-19 pandemic. The stock was 5.1% up in premarket trading.

Random read

Disney’s “Frozen” assists researchers investigating a 62-year-old unsolved mystery.

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