Macro Theme:

Short Term SPX Resistance: 5,200

Short Term SPX Support: 5,100

SPX Risk Pivot Level: 5,100

Major SPX Range High/Resistance: 5,200 SPX Call Wall – 5,211 (520 SPY Call Wall)

Major SPX Range Low/Support: 5,000

‣ 5,200 is the upside target.*

‣ 5,100 is critical support, up from 5,000 the week ending 3/1.*

‣ We look for index volatility to now contract (ref: 2/23, 1-month realized vol 14%, VIX 14.2).

‣ The week of 3/11 is the next major inflection point: 3/12 CPI, 3/14 PPI, March Quarterly OPEX (3/15), 3/18 NVDA Event, followed by 3/20 FOMC & VIX exp.*

*updated 3/4

Founder’s Note:

ES futures are +10bps to 5,247, NQ futures are flat at 18,482.

Key SG levels for the SPX are:

• Support: 5,160, 5,150, 5,115 (SPY 510), 5,100
• Resistance: 5,200 (SPX

  Call Wall

  ), 5,211 (SPY 520

  Call Wall

  ), 5,226

• 1 Day Implied Range: 0.54%

For QQQ:

• Support: 440, 437
• Resistance: 445, 450

  Call Wall

IWM:

• Support: 204, 200, 194
• Resistance: 210

  Call Wall

There is little on the data docket for today, outside of the 1pm ET 30 year bond auction.

In Monday’s AM note we outlined our price map, which is shown below. Thus far, the SPX held the lower 5,100 bound on Monday, and closed last night around 5,175. As you can see, that is up near heavy 5,200 – 5,210 (SPY 520

Call Wall

) resistance – a level which we think holds until Friday’s OPEX.

The second core view we had into this time window was that volatility would reduce into OPEX – a factor which has not yet come into play. SPX 5 day realized volatility [RV] stands at 10%, with 1-month realized volatility at 12.5% That 1-month realized vol reading is near YTD highs, despite the equity market being at highs.

Despite these RV readings, implied volatility was crushed yesterday after the CPI reading. You can see this via the collapse in SPX term structure from Monday night (gray) to this AM (green). Interestingly this IV deflation happened across the curve, despite PPI tomorrow AM and FOMC on 3/20. Its as if traders feel the CPI eliminated some FOMC tail risk. Regardless of how you feel about FOMC, traders seem to be pricing in a rather quiet period over the next 4-5 sessions. This would seem to agree with our 5,100-5,200 “neutral zone”, and the tight 55bps in our SG 1-day implied move.

This should therefore lead to volatility/trading ranges tightening into Friday.

Turning to the single stock side, one of the reasons we have been looking for equity consolidation has been the break down in single stock call skews. This appears to still be a factor, as shown below in the plot of Skew Rank(%’ile, y axis) vs IV Rank (%’ile, x axis). Extreme bullishness would appear as a concentrated red circle in the top left of the chart, which is what we saw a few weeks ago. Currently we see skews flattening/shifting which is a signal that call demand has declined, and we also see an increase in IV. Taken together its a signal of short term topping. The reality is that the leading chip stocks are broadly down week-over-week (SMH -3% this week), and we do not anticipate another major leg higher this week. The big “risk back on” triggers lie next week with NVDA/FOMC, and a break >5,200 in the SPX.