Macro Theme:

Key dates ahead:

Founder’s Note:

ES futures are -40bps, NQ -80 off of poor GOOGL & AMD earnings.

Support: 6,000, 5,950,

Resistance: 6,020, 6,035, 6,050, 6,100

TLDR: If 6k fails we will flip to a net short position, with an initial target of 5,950 (the “why” is detailed below). Upside at this juncture seems suspect, as layered positive gamma above in SPX & SPY provide resistance into 6,100. Additionally we have to flag that the “generals” keep falling: MSFT, GOOGL, AAPL, NVDA all struggling. These stocks are, of course, a ~20% weighting of the S&P500.

Additionally we continue to see the market underpricing volatility & jump risk in this market. This creates real downside risk.

To quote Scarface: “I’m reloaded!”

We’re of course referring to Captain Condor, who took a tough partial loss yesterday: SPX closed at 6,037, in the middle of their short 6,035 x 6,040 call spread.

Today we see similar condor size to yesterday, with ~4k contracts of the 6,055 x 6,060 call spread vs 6,000 x 5,995 put spread. These bands are key support and resistance targets today, but we do believe more in the strength of that upper 6,055 resistance vs 6k lower support.

The Captain enters these trades the day prior to expiration, just after the close. The problem with this strategy is that they are exposed to overnight news, like nasty earnings.

In this case, its twin -5% declines in GOOGL & AMD. Added to this was news of China looking into AAPL (-2.7%) app store practices.

Futures did bounce right at the Captains put spread strike of SPX 6k – that is also a level with some larger, longer dated positions.

This 6k level remains critical. Under that level the SPX transitions into a price area dominated by puts (see chart, below). Net put positions are associated with high volatility, and the potential for a spike in volatility that we do not think is being priced into this market.

Consider, for example, today’s 0DTE straddle at a mere $35 or 58bps (ref 6,010 IV 22%).

Consider that ES futures were -68bps overnight until around 5 AM, and we have major declines in top US stocks.

Consider that the daily high-to-low SPX range(s) over the last 5 sessions are: 1.6%, 1.48%, 0.97% 0.82%, 1.34%.

In fact, you have to go back 7 sessions to find an intraday range <58bps (red line, plot below). If you ignore that one session (41bps on 1/22), we’ve not had a single day in 2025 with <58bps of trading range. You have to go all the way to before Dec 18th FOMC to find another daily range under 58bps.

Therefore, if the market simply does what it’s been doing (moving) then these short dated options traders will have to cover short positions, which could itself invoke volatility. For this reason, we are quite concerned if the SPX moves <6,000.