Unveiling the Driving Force Behind the Explosive Stock Market Rally

The recent massive stock market rally was driven by a combination of factors, including a decline in interest rates and a lack of Treasury auctions, which triggered a gamma squeeze in the options market. The absence of central banks as buyers of bonds and decreased global liquidity levels have contributed to the decline in rates. However, the rally may not continue with the same vigor as the market is now back into positive gamma territory, which will ease volatility but may cap further gains unless the call wall in the options market moves higher. The upcoming Treasury auctions will be critical and could reintroduce volatility in the market. Overall, the macro backdrop suggests that the economy is slowing, unemployment is rising, and inflation is sticky, which may keep stocks contained from advancing much further.