Macro Theme:

 

Short Term SPX Resistance: 4,655

Short Term SPX Support: 4,575

SPX Risk Pivot Level: 4,600

Major SPX Range High/Resistance: 4,700

Major SPX Range Low/Support: 4,400

‣ We look for higher volatility this week (12/11), triggered by 12/12 CPI, 12/13 FOMC and into the huge 12/15 OPEX.*

‣ 4,700 is our current max upside target, due to a Call Wall shift on 12/12. Call Walls in QQQ/IWM are at 400/190.*

‣A break of 4,600 is our “risk off” level.*

‣ January OPEX is setting up to be a major event, with a risk that expiring large long call positions could pull markets lower into mid-January.*

*updated 12/12

 

Founder’s Note:

ES Futures are flat at 4,678. Key SG levels for the SPX are:

• Support: 4,600, 4,572
• Resistance: 4,627, 4,655, 4,700
• 1 Day Implied Range: 0.59%

Today markets await the 8:30AM ET CPI.

Our S&P

Call Walls

have jump higher from 460/SPY/4,600SPX, with SPY moving to 465 (4,655 SPX) & SPX moving to 4,700. For SPX, this shift comes more from puts (likely short puts) being added to 4,600 than calls being added to 4,700. SPY, which is a more active complex, did see calls being added to 465. The size of 4,600 is shown below, and as you can see its a fairly balanced strike in terms of put (blue) vs call (orange) gamma size. This makes 4,600 a strong support area for today, into tomorrow’s FOMC. A large +35% of these positions expire on Friday.

Note the IWM/QQQ

Call Walls

remain unchanged at 190/400.

Yesterday we did indeed breach the days S&P500

Call Wall

at 4,600, and close 39bps higher. This move was off of the back of some of the largest positive delta options flow we’ve seen in 30 days.

As discussed last night, there was a massive +5bn of positive delta flow (purple line), which was mainly driven by call buying. Further, $3bn of $5bn was in the 0DTE (teal line) space. Outside of the total magnitude and 0DTE size, what struck us as odd was the linearity of this flow.

As you can see from ~12pm to ~2PM the purple

HIRO

flow line was at a 45° angle, suggesting some type of algorithmic order flow.

Compound the strangeness, we see very large pre-market “linear” S&P buying flow today (note, again, the 45°, which seems to have turned on at 5AM. Note that this is pure 0DTE flow (teal), and comes ahead of a key CPI data point. We don’t have any great idea as to what is driving this flow, but its size is considerable, and should be monitored closely. If there is a bid out of CPI, a continuation of these flows could accelerate that bid.

Zooming out, we are looking for volatility to expand starting today, and into tomorrows FOMC and large 12/15 OPEX (see yesterdays note). We are looking at a wide range over the next week of 4,500 – 4,700, and the travel of this range is likely decided by the reaction to Powell. After clearing OPEX, we see a final move setting up with an upper bound of 4,800 (SPX all time high) and lower bound of 4,400 (SPX

Put Wall

).

Navigating these levels will be our

Call Wall

(as it shifts up we see higher SPX levels in kind), and the 4,600. A break below 4,600 is considered risk off.