Macro Theme:

 

Short Term SPX Resistance: 5,115 (SPY 510)

Short Term SPX Support: 5,000

SPX Risk Pivot Level: 5,000

Major SPX Range High/Resistance: 5,115 (SPY 510)

Major SPX Range Low/Support: 4,800

‣ 5,100-5,115 (SPY 510) is the likely high into next weeks 5/1 FOMC. We think 4,975 – 5,000 will remain as major support in through FOMC.*

*updated 4/24

 

Founder’s Note:

ES +15bps to 5,139. NQ futures +20bps to 17,885.

Key SG levels for the SPX are:

• Support: 5,100, 5,050
• Resistance: 5,115 (SPY 510), 5,125, 5,150
• 1 Day Implied Range: 0.61%

For QQQ:

• Support: 430, 425, 421
• Resistance: 431, 438

IWM:

• Support: 195, 190
• Resistance: 200, 201, 205

3 & 6 month TBill auctions 11:30AM ET. Treasury Refunding Announcement 3PM ET.

The S&P rallied 1% Friday, closing at the major

Call Wall

resistance range of 5,100 to 5,115 (SPY 510). While SPX 5,100 remains the

Call Wall

for SPX, the SPY

Call Wall

did roll higher, from 510 to 513. This 5,100-5,115 range is our “fair value” level for the S&P, as we await a directional trigger from 5/1 events.

While the SPY

Call Wall

did move to 513, as shown below, 510 remains a massive gamma strike, and our main resistance/pinning strike for today. While we have been marking this 5,100 – 5,115 area as the top of our range into Wed FOMC, should the SPX

Call Wall

roll higher (from 5,100) we will be forced to raise our SPX range top, accordingly.

As the equity market has rallied this past week, vol took a pounding, despite the prime catalysts of FOMC + Treasury refunding this week. You can see this in the S&P terms structure, which compares IV from last Monday (gray) vs this morning (teal). Short dated IV’s remain somewhat elevated due to the aforementioned 5/1 events, but longer dated IV’s have contracted back into the longer term average (shaded cone).

Tail risk/skew has also been repriced lower, as equities caught a bid and things on the geopolitical front tempered. Below we show the drop in VVIX, which signals that OTM VIX calls have cooled off. This also, again, suggests that the market is not that anxious about the upcoming FOMC. We’re unsure that FOMC may matter all that much, as expectations of rate hikes have gone down sharply over the last several weeks, and rates are at ~6 month highs.

Looking forward, with SPX at 5,100 fair value, we are watching for a quick move to one of the longer term high-gamma zones at 5,200 or 5,000. 5,000 was major support last week, and a strike with massive, supporting gamma.

To the upside 5,200 represents the S&P near all-time highs, and likely where call sellers start to step up. Upward vanna flows would likely drain completely off into 5,200, too.

Further, in a “risk-on” rally, we’d expect to see single stocks and top stocks start to break away from the pack (ex: semis), much like earlier in ’24. This drove high levels of dispersion, and low levels of correlation (see here). Recall that these dispersion/correlation metrics started to reverse in last weeks selling.

We also can’t help but notice that the equity market weakness was centered right around April OPEX, finding downward pressure from those call-heavy record S&P highs into VIX/Equity OPEX, and rallying days after expiration…