Macro Theme:

Short Term SPX Resistance: 4,558 (SPY 455 Call Wall)

Short Term SPX Support: 4,475

SPX Risk Pivot Level: 4,400

Major SPX Range High/Resistance: 4,558 (SPY 455 Call Wall)

Major SPX Range Low/Support: 4,200

‣ We anticipate the equity market high being Wednesday AM 11/15, with consolidation happening into & around 11/17th (Equity OPEX).

‣ This would clear the way for a final, year end rally. 4,600 is our current upside target, following the major CPI rally.*

‣ RUT/IWM could outperform SPX/SPY into year due to the change in options positions into Nov OPEX.**

*updated 11/15

**updated 11/16

Founder’s Note:

ES Futures are marginally higher to 4,533. Key SG levels for the SPX are:

• Support: 4,500, 4,475
• Resistance: 4,538, 4,550, 4,558
• 1 Day Implied Range: 0.67%

In QQQ resistance is at the 390

Call Wall,

support is at 384 at 380.

Today is quiet on the data front, with key events for next week being the 11/20 20-year UST auction, or 11/22 FOMC mins.

The S&P is unable to give up 4,500, which has grown significantly in strike-gamma size (+40k puts, yesterday). This large position has likely been keeping the SPX tethered to 4,500. We see roughly 15% of SPX gamma rolling off with today’s expiration, which may allow the SPX to move away from this zone in the short term. We continue to favor a downside test.

However, the bulk of Index positioning is with Dec OPEX, and this positioning may slow the upside volatility of SPX into year end, which is why we favor expressing longs via Mag7 and or RUT/IWM.

The same positioning sequence is not true for single stocks, wherein Nov is a significant expiration. Further, there is a large imbalance in the size of call positions (blue) vs puts (teal). The unwind of this large call imbalance, we believe, should lead to some downside pressure over the next several sessions. This downside pressure could result from the unwinding of long call hedges.

One of the factors that could add to weakness is the very tight pricing of IV’s for next week. Traders seem to be pricing in very low daily moves for next week, as the focus is on the Thanksgiving holiday. These <10% IV’s is “pricing for perfection”, and present a low bar for volatility to jump. In other words, if you are pricing in 50-60bps of movement and the SPX moves just 75bps, it can cause covering flow which exacerbates volatility. Therefore these IV levels may play into some downside for early next week, as positions are reset.

Ultimately we think that any short term weakness next week is bought, with equities showing strength out of Thanksgiving and into Dec 15th OPEX. Further, we would continue to maintain a bullish stance unless the SPX breaks 4,400.

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