Macro Theme:

Short Term SPX Resistance: 4,400

Short Term SPX Support: 4,300

SPX Risk Pivot Level: 4,315

Major SPX Range High/Resistance: 4,400

Major SPX Range Low/Support: 4,200

‣ We look for a range pin in the 4,300 – 4,400 into 10/18 VIXexp*

‣ 4,400 SPX is likely max upside into OPEX*

‣ 4,200 SPX is the Oct OPEX downside target if 4,300 is breached*

*updated 10/16

Founder’s Note:

ES Futures are up 15bps to 4,365. Key SG levels for the SPX are:

• Support: 4,300
• Resistance: 4,350, 4,375, 4,400
• 1 Day Implied Range: 0.77%

For QQQ resistance is at 367 & 370. Support is at 360.

Our quick summary is that we anticipate the SPX holding the 4,300 level in through Wednesday AM. Should the SPX break 4,300, we think it implies a test of 4,225 (SPY 420). Our daily SPX range remains fairly tight at 77bps.

We continue to view SPX 4,400 as the likely top into Friday’s OPEX.

Wednesday AM brings the VIX expiration, which can often mark the start of “unpinning”/expiration shifts in equity markets. We will have to wait until tomorrow to assess the impact of VIX expiration, but we feel like it will most likely pressure VIX lower and be tailwind for equities into Wednesday AM. That tailwind would then be removed >=Wednesday. Following VIX Exp we think there is less resistance to an equity drawdown.

There are plenty of triggers this week as traders will be watching tomorrow’s Retail Sales, and Thursday’s speech by Powell. Additionally there are earnings reports this AM from SCHW, Tuesday AM BAC/GS, and TSLA/NFLX on Wednesday PM.

Zooming in on the volatility space, there was quite a bid to vol heading into Friday’s close, but that bid not not come with a material decline in the S&P. Shown below is the intraday open/close pct change for the SPX, vs the open/close change in the VIX. Friday’s datapoint is marked in red, and it was indeed something of an outlier. Most of this vol bid seems to be attributed to the unfortunate events in the Middle East, and traders desire to hedge weekend uncertainty (and/or dealers widening out spreads).

We think that volatility bid/premium is likely to ease this morning. Thus far our fixed strike matrix, which compares Friday’s SPX IV’s to this morning’s IV’s, is reflecting longer dated IV’s starting to come in (red areas), and we anticipate shorter dated IV’s following suit. This syncs with our view that Wednesday’s VIX expiration may pressure VIX lower, which should buoy stocks. As noted above, we think that support wanes after VIX exp, however it likely take some poor data/Fed comments to provoke downside hedging and a break of 4,300.