Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are up 15 bps with Jobless Claims at 8:30 AM. AAPL, SNDK, WDC report tonight.

ER: MSFT -6%, TSLA +1.8% , META +9%, LRCX +3%

Resistance remains at 7,000 – 7,015. Support is at 6,950. 6,950 is our Risk Pivot, below there we look to flip short of stocks.

We note VIX remains at 16.8 (elevated) despite the passing of FOMC. The SPX term structure has held stable relative highs related to both today’s econ data, and tomorrow’s PPI (red box), while keeping pinning for next week (Monday, red arrow). We don’t want to overstate the importance of this data, as while Powell’s presser drew a ridiculously low 44bps straddle, todays 0DTE straddle is only 48bps ($34 ref 6,990). This cheap straddle is quite a juxtaposition to the rich VIX, which is nearly 17 vs 1-month SPX realized vol at 10.5% (that spread is usually 3.5 pts). The takeaway here is the non-0DTE crowd has on some hedges, but 0DTE’ers are full risk-on. That’s not an issue, until it’s an issue, at which point we get vol spasms.

While SPX vol is largely languishing, traders remain full-bull on single stocks. This is reflected by the cluster of stocks in the middle-right of our Compass grid. Traders are pricing in really great results, and anything “good” or less will likely lead to stock contraction. Beating these loft expectations is possible (ex: META +9%), but LRCX, MSFT, TSLA all had much more tepid results ≤3% gains. AAPL (ER tonight) actually has a mild put skew now, which is one of the few major stocks to hold that skewness. This suggests a light tailwind on earnings “meet” or better. We will also be watching the LRCX IV’s closely on open, as they could draw impact to the insanely high vols of SNDK and WDC (both price in 9% ER moves).

Also, on the GLD & SLV front – there are now rumblings of Iran “preemptive strikes”, which can only keep a bid in that space. The frequency of chaotic events in something else…

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