Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are up 30 bps, with CORE PCE at 8:30 AM ET.

NVDA & CRM report tonight.

The SPX is indicating over 6,900 this AM, and we see positive gamma resistance above 6,925, and that builds into 7,000 (blue zone). Below 6,900 remains negative gamma, which suggests support is lacking below. Neither of these dynamics are new – it’s the same setup we’ve had for weeks. On this point, how many times now have we seen SPX drop to ~6,800, and then reject at ~6,900? Our quick count is ~5x over the last month.

There is a decent shot of the SPX shifting up to the 6,950 area today. Conversely, if SPX breaks 6,890 it’s likely risk-off, and a retest of the 6,830 area.

Ultimately, though, it may be earnings today that dictates whether we can finally see prices outside of the 6,800s.

We’ve been talking up the idea of “short vol” options structures in the software stocks, as CRM, ZM, INTU etc report over the next few days. We did a short blog post on how you can use SG tools to find earnings trades here. More specifically, we like +2 month to expiration straddles, strangles, or diagonals into these earnings events. Reminder: This is not advice. We are not registered to provide investment advice, so do your own work on this and do not position with unlimited risk.

Here is the CRM term structure for today (teal) with IV Rank +90. You can see this IV is 15-20 vol points above that of the Dec earnings (gray), and more than 30 vol points above mid-Dec IV! While we are unlikely to return to “all is well” mid-Dec IV levels anytime soon, one can make the case that anything outside of an earnings abomination should lead to a ~20 pt IV crush for >=1 month to expiration options.

Compare this to NVDA. Today’s IV is below that of Nov earnings. Yes, the market was much more “crashy” in November, with the VIX at 19 today vs. 23 mid-Nov. Still, we think this suggests much less earnings VRP (vol risk premium) in NVDA relative to something like CRM.

The other interesting takeaway from this is that the market doesn’t worry much about NVDA earnings here. In the past its arguably mattered more. Here, the AI “vibe” is hanging over the software (and white-collar jobs) space. If some of these software names are able to turn that narrative, we’d argue a bid can come back into not only that space, but the market writ-large.

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