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: 4,450

Major SPX Range Low/Support: 4,200

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

‣ A window for equity weakness opens on Wed 10/18*

‣ 4,400 SPX (440SPY) 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 down 30bps to 4,387. Key SG levels for the SPX are:

• Support: 4,266, 4,250, 4,240, 4,225 & 4,300
• Resistance: 4,375, 4,400, 4,415 (SPY440)
• 1 Day Implied Range: 0.76%

TLDR: For today we look for the SPX to hold 4,300

Put Wall

– 4,400 SPX (SPY 440

Call Wall

), and we would not be surprised if one side of that range is today fully tested. The directional bias for Thursday/Friday is then data dependent. We still view SPY 440 as the major upside resistance into Friday, but if that

Call Wall

were to roll higher, we would likely have to update that view.

We think there is less support at the 4,300

Put Wall,

particularly if we close near 4,300 today. This is because the Put Wall would likely shift to 4,200 on weakness.

Diving In: Today we have VIX expiration at 9:30AM, and active futures traders should be aware that quick, jumpy moves can occur around that time.

Additionally there are 5 Fed speakers, and NFLX/TSLA earnings after the close. As you can see on the right, traders are looking for a 7% move out of NFLX, and 4.8% move out of TSLA.

Short term SPX IV’s are elevated due to tomorrow’s Powell speech, but remain fairly flat (i.e. no backwardation) out past next week. The shape of this curve suggests traders are anticipating higher short term volatility, but are more sanguine about the future. This relative calm in forward IV’s is likely bolstered by the 12.5% 1 month SPX realized volatility, which has been reflecting the fairly tight trading ranges in the S&P500.

As we’ve been stating, today through Friday has us on watch for an unpinning of the current tight trading ranges. The SPX has changed just +36bps over the last week, despite interest rates pinning near recent highs, and turmoil in the Middle East (which resulted in the VIX breaking 20). Our view is that the “flatness” of the S&P in the face of negative factors has been due to OPEX dynamics.

Now, the odds of holding this 4,350-4,400 range are likely to decrease due to hedging flows shifting around VIX exp/OPEX with the catalysts of Fed speakers, tech earnings, and Powell. Further, one may argue that with tensions rising overseas, the supportive bid for VIX/volatility hedging may persist into this weekend. We highlight, however, that this volatility bid could exist in the face of rising equities, particularly if Powell comes off with dovish comments.

Again, as outlined at the top of the note, we are still operating from the idea that 4,400 is the likely top into Friday. However, the downside is exposed to less supportive flows, and volatility is therefore more likely to express to the downside over the next several sessions. Our view for next week/end of month will start to take shape into Friday as the market digests upcoming data.