Macro Theme:

 

Short Term SPX Resistance: 4,400 Call Wall

Short Term SPX Support: 4,325

SPX Risk Pivot Level: 4,275

Major SPX Range High/Resistance: 4,400

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 to 4,400. Key SG levels for the SPX are:

• Support: 4,350 & 4,300
• Resistance: 4,374, 4,387, 4,400, 4,410 SPX & SPY

  Call Walls

• 1 Day Implied Range: 0.69%

In QQQ resistance is at 373, 375 then 380. Support is at 370 – 369, then 365.

Powell speaks today at 9:15 AM ET, in what should be a non-event. He also speaks tomorrow at 2PM ET which could be a bit more material, but options are not pricing in anything significant.

We’ve gone from a rather exciting, active S&P500, to watching paint dry. We do not see a major reason for that to change today to early next week, with resistance building overhead at 4,400-4,410, and positions increasing around at-the-money levels (particularly the SPY 435 strike). This makes the current range sticky, as the increase in gamma/options positions increases local hedging flows. As we approach OPEX next week, options decay is increasing which further concentrates gamma – this is the charm effect.

Traders have caught onto this theme of rapidly declining volatility. Shown below is SPX term structure from last week (gray) vs today (pink). As you can see, current IV’s are <=13% which forecasts daily SPX moves of 80bps. If you compare that to our daily move estimates of 69bps, it appears that IV’s may still be a bit too high.

As outlined yesterday AM, this volatility lull should change into Wednesday of next week.

Things are a bit more active in the Mag 7’s, wherein the majority of those names were +1% yesterday. We think these names should continue to lead, particularly those which are seeing their

Call Walls

roll higher (below is yesterdays Wall vs today):

 

• AAPL 180->185
• AMZN 140->145
• NVDA 460->470

vs:

• GOOGL 132->132
• META 330->330
• MSFT 360->360
• TSLA 225->225

While the Mag7’s are doing well, breadth is starting to look a bit more shaky. You may recall that our concern out of this rally was that some other bullish flows needed to take the “rally baton” after the put crush/short covering accelerated stocks higher.

The dynamic here is that Nov OPEX removes hedging flows which are holding markets up. Further, a hot CPI next week serve to put pressure back on equities. This is not signal that we are shifting to a bearish stance (that currently happens on a break <4,300), but it does imply that the Santa Rally is not yet in the bag. If we can close >4,400 with a shift higher in the SPX

Call Walls

, then we would look for a fairly fast move to 4,500. If this happens, we think that it is unlikely to happen before OPEX.

 

However, as puts have been cleared out below, a there is little support underneath 4,300. Overall, though, these are likely concerns and discussion points for next week.