Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are grinding higher after pullback — ES +0.50% to ~7,140,

Oil is off today, but still near recent highs of 98 (WTI). Offsetting slightly: Israel and Lebanon extended their truce three weeks.

VIX has pulled back with the AM rally: 18.75.

Today: Advance Durable Goods 8:30am and Michigan Consumer Sentiment Final 10am — the prelim printed 47.6, a record low, with 1-year inflation expectations jumping to 4.8%. Norfolk Southern reports pre-market.

Bottom line: The setup into today’s close is weekend carry risk on a tape that is lightly-supported by MM gamma >7,100, but structurally fragile. That said, its hard to short this market when SMH continues to rip, and INTC is up +25% after TXN being up 10%. That said, if oil starts to break out on a weekend incident, the short-gamma tail (customer gamma still well off the dealer cushion) gets activated Monday with no cushion. Key grid unchanged: 7,150 resistance (ES testing it now), 7,090 pivot, 7,000 major support.

Much like yesterday you can see there is a pocket of very light/flat gamma from 7,000 – 7,100 (red box). Yesterday, when things got spicy, this same region very quickly flipped to a negative gamma patch as traders closed up short dated positions into the dip. Looking into next week, there remains a light positive gamma patch <7,100, and should any risk-off headlines materialize, we suspect negative gamma fills in, and we can see spicy downside.

That downside picture fights the SMH bull-train which just won’t stop. Today its bolstered by INTC’s huge +25% ER jump. We will need a major geopolitical escalation to crush this hot SMH upside.