Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are off 80bps.

GOOGL & TSLA are both off 5% & 7%, respectively, as investors worry about CAPEX.

US 10Y is now at 4.7% – its highest level since Jan ’25.

Resistance: 7,480, 7,500

Support: 7430, 7,400

This move places SPX under our Risk Pivot level at 7,480. Mix in the COR1M <5, and VIX expiration that just passed, and you get a situation that could get nasty.

If you look at TRACE, you will see the map shows positive gamma for SPX into the 7,300s. This is a fairly light amount of positive gamma, and should some traders start to buy put options we may see that gamma flip to negative. The GEX curve below illustrates this, wherein you see that low level of positive gamma to about 7,300. If VIX starts to push (even) higher, that is a signal this SPX positive gamma is going to wear off. We’ll also be watching HIRO for negative flow in the S&P500, Equities, and Nasdaq.

Our stance into today was owning short dated put flies as a way to hedge risk. Now that we are under the Risk Pivot we will look to add to this position, and/or to buy Aug/Sep S&P put spreads.

While the market is likely responding to problematic Mag earnings, we point out that the VIX is now shifting higher (as is volatility) right after the OPEX window (VIX Exp y’day AM). The passing of OPEX may make it easier for the indexes to express some volatility.

COR1M, a primary risk flag for us, remains near 4 as of last night. This at its core suggests the spread between index vol and single stock vol is too wide, and this typically rectifies via a market selloff/vol spasm which shoots index vol higher along with single stock vol. Said another way: this could get nasty. Admittedly, we have thought that for a few weeks now, since COR1M went <8. During that time the AI-tech trade was pummeled (as was QQQ), but the SPX remained flat. It was an uncorrelated selloff.

The difference now is we have lost the Risk Pivot level (7,480), and Mag earnings + Iran/rates are not looking good.

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