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The Underlying Bid Gets Tested and Survives
RiskReversal Recap:
RiskReversal Media & RiskReversal Media
May 19, 2025
MARKET WRAP
As we mentioned in last night’s weekly preview, today would be a test of the recent action action and the results were very similar, with the down open bought and the SPX putting in its 6th straight up day (barely). Treasury yields also saw a roundtrip helping to ease fears elsewhere over Friday’s Moody’s downgrade.
On the day, SPX +0.1%, QQQ +0.1%, IWM -0.5%. The 10Y yield got as high as 4.56% this morning but backed off almost all of the move and is now 4.45%. The VIX popped back above 18. Oil and gold both with small moves higher. DXY opened lower and stayed that way for the most part, now $100.36.
After hours: SPY is a tad lower after hours. No major earnings moves.
MRKT Call: Coverage of the Moody’s downgrade including Ray Dalio’s take. The rally near 6000 SPX and what’s next.
RiskReversal Pod: Lori Calvasina, Head of US Equity Strategy at RBC joins to talk equity targets, valuation concerns, AI in corporate strategy, and fluctuations in the 10-year yield
MRKT MATRIX: TODAY’S TOP STORIES
S&P 500 is flat as investors shake off Moody's downgrade (CNBC)
Mortgage rates cross back over 7% after U.S. credit downgrade (CNBC)
Ray Dalio says the risk to U.S. Treasurys is even greater than what Moody’s is saying (CNBC)
BlackRock’s Rick Rieder says this is the ‘sweet spot’ in bonds right now (CNBC)
Morgan Stanley’s Wilson Says Buy US Stock Dips After Moody’s Cut (Bloomberg)
Fed Officials Signal Rates Likely to Stay on Hold Until at Least September (Bloomberg)
Trump Tax Bill Advances After GOP Deal for Faster Medicaid Cuts (Bloomberg)
Jamie Dimon’s Would-Be Successors Audition for the Top Job at JPMorgan (WSJ)
Nvidia announces new tech to keep it at the center of AI development (CNBC)
WHAT’S NEXT?
Stocks opened lower today in what looked like the first real test of the recent rally, potentially setting up a pause after five straight days of gains. But by the closing bell, the market delivered the same message it's been sending for weeks: buyers remain firmly in control. The S&P 500 notched its sixth consecutive gain, with dip-buyers once again stepping in and pushing the index to a slight gain by the end of the session.
There was speculation heading into the week that Friday’s options expiration could disrupt the underlying forced bid dynamics that had been helping to support the rally recently—especially the steady intraday “buy the dip” seen throughout the past two weeks. However, today’s action suggests that support remains firmly intact even if it’s not as aided by options gamma as last week. Signs are mounting there’s a significant short-covering bid at work as well.
This rally’s persistence is catching many market participants off guard—particularly those who faded the V-shaped bounce off recent lows and expected various former support (now resistance) levels to hold on the way back toward the highs. That positioning mismatch appears to be fueling some short covering, which can be powerful and self-reinforcing. Historically, these dynamics can propel rallies well beyond expectations until that bid exhausts itself.
In short, what started today as a test of recent strength was another confirmation of an underlying bid, for now.
Tuesday May 19th:
Pre-market: HD 3.6%
After-hours: PANW 7.2%, TOL 6.9%
TODAY’S EPISODES
Watch MRKT Call’s newest episode: Markets React To Moody's U.S. Downgrade
Coverage of the Moody’s downgrade including Ray Dalio’s take. The rally near 6000 SPX and what’s next. |
Analysis: TLT, SPX, VIX, JPM, WMT, US10YY
Chart of the Day: Carter’s VIX charts
Earnings Preview: WMT
Your Questions Answered:
What just happened to JPM?
Guy where do you think USD/JPY can get to, 130?
Do you think these rapid V reversals ever end?
Learn more about our sponsor, MoneyLion.
Listen to RiskReversal Podcast’s newest episode: Is Lori Calvasina Bearish, Bullish or Just Bewildered?
 | Dan Nathan hosts Lori Calvasina, Managing Director and Head of US Equity Strategy at RBC. They discuss market trends, economic indicators, and the impact of geopolitical events and tariffs on market performance. Lori shares her insights on equity targets, valuation concerns, and the influence of passive investing and institutional behavior. |
The conversation also covers the significant role of AI in corporate strategy, fluctuations in the 10-year yield, and investor reactions to recent market movements. Lori emphasizes the importance of adaptability and a data-driven approach in forecast and strategy amidst market uncertainties.
