Macro Theme:
Key dates ahead:
- 4/9: Core PCE
SG Summary:
Update 4/8: We apparently have a deal. SPX is indicated to open near 6,800, which should be come grinding resistance. We now look to transaction to selling ~1-month Index vol/options (i.e. SPX/SPY) and buying single stock vol/options (Mag 7, etc), with an eye on that trade getting compressed by April expiration next week.
4/7: The idea that meaningfully higher oil would shock equities has not come into play, and traders stare down an 8PM EST deadline today (Tue, Apr 7). It seems like the market is still pricing in the odds that a deal is ultimately done here, as based on the oil curve (heavy backwardation) as well as equity vols (suppressed). We now eye positive gamma resistance at 6,700 on a “deal”, with a break of 6,580 likely leading to a test of 6,500. Ultimately the right tail crash remains real, even if it has not yet come into play. Ultimately the play here, on the left or rail tail, seems to be expressing views in Mag 7 options which are holding <=10% IV ranks (cheap!).
Key SG levels for the SPX are:
- Resistance: 6,800
- Pivot: 6,700 (bearish <, bullish >) updated 4/8/26
- Support: 6,750, 6,700
Founder’s Note:
Futures are off 30bps this morning after Iran flagged a ceasefire violation and Trump said arms “will remain in place.” Oil has bounced back to 99 from yesterday’s 94 low. The 2-week ceasefire is already looking fragile — and the market is starting to price that in.
Bottom line: The easy money from the ceasefire was made yesterday. Today is about digestion — 6,800 resistance, ceasefire headline risk, and PCE positioning. Stay with the index vol sell / single stock vol buy structure. If >6,800 breaks with positive
HIRO,
the grind higher extends some, but we are looking at 6,800 as solid resistance into OPEX next week. Looking past today, if ceasefire cracks, 6,700 is first support with negative gamma accelerating below.
Yesterday’s +2.5% SPX pushed right into thick, +$10bn 6,800 resistance. That ceiling holds until proven otherwise, the fact that such strong call selling showed up at 6,800 is a sign that is where “max fair value” rests.
We watch 6,740 as big support today, due to a large +99th %’ile MM strike at that level.
The key structural read is that we remain in a negative gamma regime to the downside, where moves should be amplified, not dampened. Added to that the vol premium has been zapped, and so sharp downside would be met with a vol bid, and that mix were big downside events happen.
Yesterday’s vol crush was historic in its context — VIX dropped from 26 to 21 which is the second largest relative decline in history. We yesterday tried to make the case that the vol crush was a major driver of equity returns, as “VRP” is such a source of Alpha in modern markets. This view matters vs believing the market is/was pricing in “all clear” from a macro/fundamental perspective – a VRP driven rally is less stable.
Ultimately stocks and bonds are still moving together against oil prices, which signals a macro-driven, headline-sensitive tape as the underlying driver despite 1-day vol spams.
Today VIX is ticking back up (+1.6%), and the front-end is repricing the ceasefire as less certain while the term structure normalizes. You can see this with today’s term structure (teal) being mildly higher than yesterday (yellow) – but both are well below Thursday (gray). Note tails, as seen with VVIX, remain elevated. This flags that tail risk hasn’t fully dissipated. If/when tail risk comes out it should add a lift to stocks.
The trade from yesterday’s note — sell index vol, buy single stock vol — is still one we like. Yesterday’s PM confirmed: index IV was crushed across all tenors while individual name vol should expand with earnings approaching. This COR1M compression trade has room to run into April expiration next week. Consider TSLA, for example, which has its earnings inside of 30 days – that IV should hold up strongly vs names without that event-vol bid.
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