Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are flat. JOLTS 8AM, Jobless Claims 8:30AM ET.

“Transient moves” are clearly the regime, after seeing strong early market rallies give may to afternoon mean reversion. The current gamma structure is, in a word, “sloppy” (see yellow box & black TRACE map around ATM), which should read to more of the choppy, transient movement seen in resent days. We use the term “transient” because the flows that are slow dominant at one time/hour of the market, disappear ay another time/hour (generally 0DTE). Given this, we will continue to watch

HIRO

to decode intraday movement, with trending positive/negative

HIRO

values strong indications of higher/lower equities.

Again, as said many times the last few days, we are treating moves as intraday swings until we regain some meaningful positive gamma and/or vols normalize further (ie VIX ~15-16).

What can be said about this market is that vol didn’t escalate in a meaningful way, and downside has so far been contained. We highlighted this in detail yesterday AM, and note the prime feature of yesterday’s (initial) rally was a slamming of vol. Those vols slid a bit higher as the SPX closed weaker, but the general idea of vol lower is still in tact (below is Monday SPX IV vs this AM). The takeaway is this: volatility as an asset class is a key driver here, meaning the opportunity to sell vol is on many traders minds. If/when they get active selling vol, it pushes SPX higher. That being said, market structure is not supportive of a meaningful sticky/multi-day trend until SPX finds some positive gamma – a dynamic that still likely rests >6,900.

On the topic of vols, we had +90th %’ile skews just 1-2 weeks ago, and that over-bid has faded. Interestingly, we see AMD calls are now bid out of their earnings event, and there is still a bid into NVDA & AVGO which report 11/19 & 12/11, respectively. This matters because it suggests the AI/Semi story remains in tact – and that is the key driver of positive market sentiment. These equity vols are now not such an obvious sell – but also not yet an obvious buy, either. We bet a fatter pitch evolves here (on dynamic of price/vol), particularly if we have another few days of chop.

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