Macro Theme:

 

Short Term SPX Resistance: 5,265

Short Term SPX Support: 5,200

SPX Risk Pivot Level: 5,200

Major SPX Range High/Resistance: 5,300

Major SPX Range Low/Support: 5,000

‣ 5,300 is the short term upside target.*

‣ 5,200 is critical support, up from 5,100 on 3/20. Below 5,200 is our risk off indicator.*

‣ 5,300 is our target into April OPEX.*

‣ NVDA’s event on 3/18 failed to renew the call bid in the chip sector, likely triggering longer term consolidation in the space (ref: 216 in SMH).**

*updated 4/1

**updated 3/19

 

Founder’s Note:

ES are +30bps to 5,282. NQ futures are +40bps to 18,450.

Key SG levels for the SPX are:

• Support: 5,210, 5,200, 5,185, 5,165, 5,150
• Resistance: 5,250, 5,269, 5,275, 5,300
• 1 Day Implied Range: 0.62%

For QQQ:

• Support: 440, 430
• Resistance: 445, 450, 460

  Call Wall

IWM:

• Support: 200, 195
• Resistance: 205, 215

  Call Wall

Jobless claims 8:30 AM EDT, Tbills 11:30AM EDT, and a series of Fed speakers: 12:15 PM EDT Fed Barkin Speech, 12:45 PM EDT Fed Goolsbee, 02:00 PM EDT Fed Mester, 07:20 PM EDT Fed Musalem, 07:30 PM EDT Fed Kugler

TLDR: We remain at a critical risk juncture around 5,200, and its likely tomorrow’s NFP data that triggers the next directional leg. To the downside we note support at 5,100, and upside major resistance at 5,265 (SPY 525). For today, our models point to a tight 62bps trading range, likely centered around 5,200-5,210 (SPY520).

The S&P continues to find buoyancy at the 5,200 level, which continues to be our key risk-off level. This risk-off level is the bottom of this trend channel that has been in place since late 2023, and tests of the bottom of this channel has generally corresponded with options expirations. This suggests that what little downside we’ve had has been driven by the technical hedging flows related to options expirations.

In this case, we are seeing equity weakness (SPX testing critical 5,200 support, top chart) corresponding with a bump in rates (US10Y, bottom pane, blue line), which has lifted equity vols (VIX, middle pane, orange line).

Dip buyers have been rewarded each and every time the equity market has shown any pause, and eyes appear to be on tomorrows NFP. You can see this attention via the mildly elevated SPX term structure, below. We state that its “mild” as the IV tied to tomorrow’s expiration fails to touch the top of the statistical range (shaded cone). What is arguably more interesting is the higher IV’s for expirations out past May. While those IV’s are a rather tame 12%, they are at +90th %ile IV levels vs the last 3 months. The implication of this is that there may be a bit of hedging starting to come into markets.

What has struck us most about flow this week, is that it has been completely dominated by 0DTE flow. This can be seen by the 0DTE

HIRO

line (teal) being tightly correlated to the All Exp flow (purple). Therefore we posit that market reactions seen this week are driven by those with very short term views/flows, and these flows have been essentially feeding mean reversion into the 5,200. Longer dated call buyers nor longer dated put buyers have decided to take much action despite a bit of equity weakness. The importance of this is that 0DTE flows are “here today, gone tomorrow”, which means we should not extrapolate longer term views (even a few days out) based on recent market movement. Risk remains high.

Looking back, equities have broadly done little since March OPEX & the big NVDA event (3/19), which served to zap the bullish skews in the leading chip sector. Since then, one can argue there has been a search for leadership. IWM’s (green) & financials (orange) took a shot, and broke higher into quarter end, but this week have corrected. This correction times with a shift higher in rates, as seen with the lower TLT (red). At this same time, both gold (teal) and oil (yellow) have moved higher. We flag this at it may suggest a change in macro narratives – a narrative that has been distinctly equity positive. As such, if this narrative changes, it implies that the recent equity contraction is less positional (i.e. shifts around OPEX) and more fundamental.