Macro Theme:

Short Term SPX Resistance: 5,250

Short Term SPX Support: 5,100

SPX Risk Pivot Level: 5,200

Major SPX Range High/Resistance: 5,300

Major SPX Range Low/Support: 5,000

‣ (4/12) Monday & Tuesday flows could be supportive of equities based on charm + vanna flows. Accordingly, this may be an interesting place for call flies that profit on a move into the 525 SPY area (SPX 5,265), as we’ve seen sneaky rallies on the Tuesday before VIX expiration (4/17), as vol could be shoved lower due to expiration mechanics.*

‣ A risk-off window then opens up on Wednesday AM with VIX expiration (4/17), and extends into the following Monday.

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

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

*updated 4/12

Founder’s Note:

Both ES -20bps lower, to 5,235. NQ futures -40bps lower to 18,415.

Key SG levels for the SPX are:

• Support: 5,200, 5,150
• Resistance: 5,220, 5,241, 5,250
• 1 Day Implied Range: 0.62%

For QQQ:

• Support: 440, 435
• Resistance: 445, 450

  Call Wall

IWM:

• Support: 200, 198, 195
• Resistance: 205, 210

  Call Wall

It was an impressive rally in equities yesterday that pushed the S&P500 back into our risk-

pivot

level of 5,200 – 5,220 (SPY 5290). We also see no major data points on the docket today, so this combines with yesterday’s rally to drop short term vols (yellow box). However, longer dated IV’s remain at highs seen earlier this week. There remains a gap below 5,200, down to 5,150, but its hard not to face the core fact that vol buyers were totally absent in this market. If we hold above 5,200 into this afternoon, we should catch some support from the weekend effect (traders avoiding the theta bill), which pushes us into the Monday of OPEX week.

We’d believe that Monday & Tuesday flows could be supportive of equities based on charm + vanna flows. Accordingly, this may be an interesting place for call flies that profit on a move into the 525 SPY area (SPX 5,265), as we’ve seen sneaky rallies on the Tuesday before VIX expiration, as vol is shoved lower. A risk-off window then opens up on Wednesday AM with VIX expiration, and extends into the following Monday.

While 0DTE flow was active in buying dips, which syncs with the short-dated IV drop and gap fill back to the 5,200

pivot,

there were signs yesterday of longer dated call buying. Consider the Mag7 index below, with a healthy $4.4bn of

call deltas

bought (orange), for a combined +$5.2bn reading (calls + puts) which was the most positive reading in the last 30 days . Note the blue put line(s) – no one bought puts yesterday.

We wanted to take a brief step back here, and assess the landscape. For the last several weeks, we’ve been warning of risk-off moves if the SPX moved <5,200, and suddenly our eye has shifted towards a sucker-punch move higher into an OPEX-derived window of strength if the SPX moves back >5,200.

Below 5,200, our concerns we’re/are that large directional flows would initiate, and we’d see a large jump in volatility. Its clear that directional hedging flows did not initiate, but vol did hit YTD highs, as shown in the VOLI index below. VOLI measures 1-month at-the-money SPY IV. Through this lens, we feel that “risk-off <5,200” has served us well.

We’ve also seen some of the largest moves of the past year, with last Thursday of particular note. This chart plots the intraday high/low SPX range (x axis), vs the open/close range. We like to view it as a measure of mean reversion, and so Thursday’s move shows as a sharp directional move – something we’ve not seen March ’23 (bank crisis). Despite these spasms, equities really couldn’t put together a string of down days.

In yesterday’s Member Q&A, we discussed a few theories as to why equities refuse to take the vol-bait. The implication of dips being persistently bought can be seen as a partly a function of 0DTE, but also as a sign that dealers were never in a position to have to directionally hedge (gamma). Further, put skews have been tame, which is a function of a lack of vol buyers, but also a sign that the supply of vol is ample (vega). In other words: the dealer/market maker community was happy to buy dips due to their long gamma & long vega positions. Going forward, we will to continue being on-alert <5,200, and if we see put skews increasing into weakness it will be a major signal that selling is possibly “real”. There remains these odd liquidity holes, and high cross asset vols that warrant attention.

Moving along, earnings season kicks off today with banks, JPM, WFC and C report this AM and all have 3% implied moves (via our dashboard on the main SG page). Earnings are an opportunity for the narrative to shift to positive stock earnings as a catalyst for bullishness – at least if chip-sector earnings were as strong as Feb.

Lastly, we wanted to touch on gold as it is breaking higher to all time highs >2,400. In Tuesday’s note we broke down how monitoring IV could help analyze upside positioning. In this case it seemed like call vol was just warming up, and vols show higher this morning as the gold price is +1.6% on the day. 1-month GLD IV’s have historically been able to reach the 20%’s, and are currently ~17%.

If you look at skew, we’ve seen our RiskReversal chart get into the 5-7pt range in recent past (vs 4, currently), and so there is a bit more before we’d get cautious that the GLD move is overdone. $225 GLD is the overhead target, with 220 first support.