Macro Theme:

Key dates ahead:

 

Founder’s Note:

Futures are 60bps higher, leaving the SPX to test the 6,000 level.

Resistance: 6,000, 6,020, 6,050

Support: 5,950, 5,925, 5,900

NVDA is +1.3% after earnings, to ~$132.5

Jobless claims & GDP 8:30AM ET

TLDR: SPX risk on >6k, risk off <5,975

Below compares SPX IV’s from last night (pre-NVDA) to this AM, and as you can see they are off by a strong amount. This, ahead of the 8:30AM ET data out in a few hours, and PCE tomorrow. Accordingly, unless the 8:30 data is a tail, we would expect to see IV’s further contract which places a vanna-based bid into equities (in line with our view from y’day AM).

Despite the feel of big swings over the last few days, 5-day realized vol is just 9.2%, with 1-month RV at 10.2%. Sleepy.

Given that, the “fair value” for VIX is somewhere near 14, with 14% being where current ATM vols are for the SPX (>=next week expirations). This tells us there is some vol premium to squeeze if todays (& tomorrows) data is benign.

The SPX gamma map sets up as follows:

If the SPX can recover 6k, there is a large gamma bar (and a lot of other OI) that should provide support. There is a large dealer short put (traders are long) the 5,975 put, which suggests that a move <5,975 can pick up steam.

Again, should today’s data prove to be in line, we would assume SPX can retake that 6k level, at which case we have eyes on the ~6,075 area wherein we see traders selling calls.