Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are up +10bps after the Trump/Xi meeting, after FOMC, and after round 1 of Mag earnings:

GOOGL: +8.5%

META: -8.8%

MSFT: -1.8%

This leaves SPX just under 6,900 pre-open, and bulls need that >6,900 or else the decay of expensive calls could bring the correction we’re on alert for. If SPX is <6,900 then we weary of the soft underbelly in this market, per yesterdays note.

The lack of price movement is the interesting part here, particularly given that vols have come in 1-2 points vs yesterday (below is 1-month SPX skew today (teal) vs yesterday), after trending higher for most of this week. We also note bond yields are on the move higher post-FOMC – which is of course interesting given the rate cut yesterday.

SPX positions are site light today – no Condors, with notable negative gamma to the upside, and some light positive gamma into 6,850, which remains our “strike of last resort”(i.e. we

Pivot

to bearish <6,850). This signals that prices may move a decent amount today with our eyes on 6,950 to the upside and first support at 6,850. Obviously if vol continues coming down it should add a vanna kicker for upside SPX, and 7,000 is the giant overhead target into tomorrow if stocks re-start upside momentum.

The prevailing question here is this: if you are currently long calls with call values in the +90th %’ile (i.e. expensive!), are you getting the upside thrust from these events that you need? Expensive calls need big upside to justify high prices. Thus far FOMC/Trump Xi/Mag earnings are all not showing to be a boost, and those calls are paying out the FOMC/Trump Xi event vol, and so if the upside action doesn’t form then those expensive calls are going to start bleeding out, which could weigh on things.

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