Macro Theme:

Short Term SPX Resistance: 4,350 Call Wall

Short Term SPX Support: 4,300

SPX Risk Pivot Level: 4,275

Major SPX Range High/Resistance: 4,350

Major SPX Range Low/Support: 4,200

‣ We remain bullish of equities while the SPX is >4,300

‣ We anticipate that the equity market volatility will continue to contract into Nov 17th expiration, and hold that view while SPX holds >4,300

*updated 11/3

Founder’s Note:

ES Futures are flat at 4,331. Key SG levels for the SPX are:

• Support: 4,300, 4,266, 4,250
• Resistance: 4,313, 4,336 and 4,350
• 1 Day Implied Range: 0.8%

For QQQ support is at 360 then 350, with resistance at 362 and 365.

AAPL is -2.8% after poor earnings last night.

Traders will be watching this mornings 8:30AM NFP + Unemployment Rate.

The are two core updates to positioning. First, in regards to open interest we saw large sets of call interest come into the 4,300 – 4,350 area of the SPX. We believe these are trading selling calls (top chart), which adds positive dealer gamma. This in turn, slows volatility. This supports the idea of upside resistance/slowing of momentum in the S&P >4,300.

The good news for bulls is that these call positions have shifted up the SPY

Call Wall

to 432, with the SPX

Call Wall

now at 4,350. 4,350 is now our short term upside max level, and we would be looking to raise that upside max level if the

Call Wall

s roll higher.

The second piece of resistance is now provided by a decline in IV’s. This can be seen in our vanna model, where the trough has slid higher to 4,350 from 4,300. However, you may note that the trough of the purple IV-adjusted line is above that of the gray line. This informs us that further declines in IV + moves higher in the SPX adds to dealer selling into equity upside. The takeaway here is that this positioning should slow upside movement/volatility, and are not likely a force to shove markets lower.

In terms of steep market downside, traders are now heavily discounting that happening. This can be most clearly seen in the movement of VVIX & SDEX, which measure the relative pricing of VIX calls & downside SPY puts, respectively. The decline of these indexes inform us that traders see reduced tail risks. Further, these indexes are likely falling as traders sell this out-of-the-money crash protection, which serves to boost equity prices.

The takeaway here is that we are bullish of equities while the SPX remains >4,300. We think that the rapid upside seen over the last several days will now slow, as volatility contracts into the Nov OPEX. Should the SPX move <4,275 we would flip to a bearish stance.