Macro Theme:

 

 

Short Term SPX Resistance: 4,400 Call Wall

Short Term SPX Support: 4,350

SPX Risk Pivot Level: 4,300

Major SPX Range High/Resistance: 4,400

Major SPX Range Low/Support: 4,000

‣ Barring a major CPI miss, one has to favor a final Christmas rally out of late Nov and into the December Expiration. Assuming that the CPI is in line, we’d anticipate the equity market high being Wednesday AM 11/15, with consolidation happening into & around 11/17th (Equity OPEX). This would clear the way for a final, year end rally. 4,500 is our current upside target in that scenario, and that would adjust based on call positioning.

*updated 11/9

 

 

Founder’s Note:

ES Futures are flat at 4,400. Key SG levels for the SPX are:

• Support: 4,374, 4,360, 4,350
• Resistance: 4,387, 4,400, 4,413
• 1 Day Implied Range: 0.67%

For QQQ, resistance is at 373, 375 then 380. Support is at 370 then 365.

This morning we see jobless claims at 8:30AM ET, and then Fed Bostic 9:30AM, Barkin 11 AM & Powell at 2pm ET. Short dated IV’s are a bit elevated withe these events, however we’d anticipate them passing without much fanfare. If that is the case, it releases a bit of event vol, which serves to support stocks.

Zooming out, there is little to update from our note yesterday, as gamma continue to build and ranges stay tight. VIX/Vol also continues its descent, as shown in the VIX plot below. We anticipate this trend in vol to continue in through next Tuesday’s CPI. This lower drift should continue to provide a light tailwind/support for equities, which are also enjoying the warm embrace of positive gamma. Further, we note our major

Call Wall

resistance remains at 440 SPY/4,400 SPX.

 

We also find this interesting stat via ZH: “VIX – day 8 [of declines]: We are getting closer to the record…We’ve seen 8 down days [in] a row 13 times, 9 in a row 9 times, 10 in a row 3 times and never (yet) 11 down days in a row” (Bill Luby).” It seems to us that the VIX has a shot at this record, given the CPI is 4 more days away…

The lack of demand for downside hedging is palpable. Shown here is our SPX risk reversal, which measures the IV of a 30 day to exp, 25 delta call vs a 30 day 25 delta put. As you can see, this metric is up near its highs going back to early ’20, which is a signal that calls are at high values vs equivalent puts. With this we’d note that the major equity risk level is/was rates, and the US10Y is now down at 4.5%, from 5% just 2 weeks ago.

The above may signal that upside equities/vol smash is in need of some digesting, but its not a signal that a sharp equity drawdown is pending. We think that in through next weeks CPI/VIX exp/OPEX we’ll see some consolidation as positions reset. Barring a major CPI miss, one has to favor a final Christmas rally out of late Nov and into the December Expiration. Assuming that the CPI is in line, we’d anticipate the equity market high being Wednesday AM, with consolidation happening into end of next week/early the week of 20th.