Macro Theme:

 

 

Founder’s Note:

Futures are off 20bps after NVDA earnings last night. NVDA is -3% premarket to 141.

The initial reaction to NVDA earnings is ambiguous, which (initially) gives volatility sellers the upper hand. We remain of the view that a longer term directional move will start today, and we’ll be on

HIRO

watch to see how things with NVDA develop. Strong long term call buying is the bullish signal bulls want to see. Conversely, heavy put buying, and a break <140 is the likely long term downside trigger.

For SPX, gamma shows as mildly positive, with 5,900 as the key support/resistance ”

pivot”

. We look to remain long of equities if/when SPX > 5,900, with no major resistance to 6,000.

To the downside, support is at 5,875 & 5,850. We shift to risk-off <5,850.

Along with NVDA we are eyeing the geopolitical risk premium, which has grown over the last several sessions. This is resulting in the VIX >17, along with a jump in vol indicies like the SDEX, below. This index measures the value of a ~30DTE SPY 1 std dev OTM put vs an ATM put. While we are not geopolitical analysts, we do think that this risk premium is going to be tough to extract over the coming days, which may hamper equity upside.

This, combined with a NVDA move <140 could be the downside bat-signal.

We have seen the downside gamma picture deteriorate over the last several sessions. There is now a clear pocket of negative gamma <5,850, which infers downside volatility could spike into that zone. Further, if equities do start to slide, the geopolitical risks may hamper short-vol sellers response(s) – or even induce put buying, which would add to negative gamma.