Macro Theme:

 

Short Term SPX Resistance: 5,265 (SPY 525)

Short Term SPX Support: 5,200

SPX Risk Pivot Level: 5,200

Major SPX Range High/Resistance: (5,265 SPY 525)

Major SPX Range Low/Support: 5,000

‣ 5,265 is the short term upside target.*

‣ 5,200 is critical support, up from 5,100 on 3/20. Below 5,200 is our risk off indicator.*

‣ 5,300 is our target into April OPEX.*

‣ NVDA’s event on 3/18 failed to renew the call bid in the chip sector, likely triggering longer term consolidation in the space (ref: 216 in SMH).**

*updated 3/28

**updated 3/19

 

Founder’s Note:

ES are flat at 5,305. NQ futures are -10bps to 18,485.

Key SG levels for the SPX are:

• Support: 5,210, 5,200
• Resistance: 5,250, 5,269 (SPY

  Call Wall

  ), 5,275, 5,300

• 1 Day Implied Range: 0.73%

For QQQ:

• Support: 440
• Resistance: 445, 450

IWM:

• Support: 207, 200
• Resistance: 210

  Call Wall

GDP + jobless claims are out at 8:30AM ET, then another set of data (Mich, Home Sales) out at 10AM, 4 & 8 week TBill Auction 11:30AM ET.

Markets are closed tomorrow, 3/29.

TLDR: Nothing to see here. Large positive gamma has indicies wrapped up, and we think IV’s will be pressured into the 3 day weekend. Both of these factors serve to support equities.

Major indicies were again quiet for most of yesterday’s session before a big move shifted into the close – but this time the move has +60bps higher (vs -50bps on Tuesday’s close). That led to an +85bps close in SPX, which was outpaced by RUT +218bps & DJIA +122bps. On this same day QQQ was up only +34bps, and SMH was -3bps. This obviously speaks to equity rebalances and rotation across equities as opposed to a shift out of equities.

With tomorrow being a market holiday, we suspect most of the session will again be quiet – however because its also the last trading day of the quarter, traders should be on watch for another sneaky move in the last hour of the session. Regardless of the possible rebalancing, implied vols should continue to leak lower, as traders seek to avoid the theta burn of a 3-day weekend.

On the topic of rebalancing, its been very interesting to see very large 0DTE flow seemingly sparked just before these big end of day moves (which have been linked to pension rebalancing). You can see this in the 2-day plot of 0DTE

HIRO

flow (teal line), below. While you may want to debate if 0DTE sparked before the S&P started moving (we think it did), its clear that the magnitude of 0DTE was large, with -$2bn in delta into the close on Tuesday, and a whopping +$5bn yesterday. We wonder if 0DTE’s have found a new use case in dealers offsetting delta in pension rebalances. If, for example, a bank dealer needs to sell a $500mm basket of S&P500 stocks, they could in theory buy some 0DTE puts to notionally hedge that basket.

Further backing this theory, we also some some rather large DIA prints into the close, making it nearly the largest positive

HIRO

day in the last 30. RUT/IWM also saw big +$400mm in positive deltas in the last hour.

Turning to current positioning, gamma continues to accrue around at-the-money SPX levels. In particular we see both 5,200 & 5,300 strikes gaining in size, and some unusual 5,300 strike put positions added in recent days. These are likely related to box spreads, and they appear to be the reason our

Call Wall

has now shifted to 5,400.

Regardless of the SPX Wall being at 5,300 or higher, the S&P still has to contend with a load of SPY gamma in the sticky 520-525 region, highlighted below. All of these strikes have a larger

gamma notional

than the major SPX strikes plotted above. In particular, SPY 525 (SPX ~5,265) is the largest positive gamma strike on the board, and its likely the SPY will hit resistance at that level. These positions should continue to restrict S&P volatility, which reduces volatility. As volatility declines, it invokes positive equity drift (vanna flows).