Macro Theme:

Short Term SPX Resistance: 5,050

Short Term SPX Support: 4,980

SPX Risk Pivot Level: 5,000

Major SPX Range High/Resistance: 5,115 (SPY 510)

Major SPX Range Low/Support: 4,800

‣ 5,100-5,115 (SPY 510) is the likely high into next weeks 5/1 FOMC. We think 4,975 – 5,000 will remain as major support in through FOMC.*

‣ Post-FOMC price levels:

• We see a large gap in support from 5,100 to 5,000. Volatility likely remains elevated for several weeks should this gap fill.
• Upside resistance is at 5,150, then 5,200. Realized vol likely declines sharply following an initial move higher.

*updated 4/24

Founder’s Note:

ES -55bps to 5,-39. NQ futures -86bps to 17,420.

Key SG levels for the SPX are:

• Support: 5,015 (SPY 500), 5,000, 4,980
• Resistance: 5,050
• 1 Day Implied Range: 0.57%

For QQQ:

• Support: 420
• Resistance: 430, 431

IWM:

• Support: 190
• Resistance: 105, 200, 201

Last nights earnings results: AMZN +1.8%, AMD -6%, SMCI -12% , SBUX -12%

Treasury Refunding 8:30 AM ET, FOMC 2 PM ET.

The S&P is indicated to open near 5,000, which implies an opening near large support. That support is being tested ahead of several key announcements: Treasury Refunding (8:30AM ET) & FOMC (2PM ET).

While ES show a ~2% decline from yesterday’s opening levels, we saw gamma positioning that allowed for a quick slide through the SPX 5,100->5,000 range. To be clear, we did favor the S&P holding 5,100 into today, but a cadre of weak data, followed by poor chip-sector earnings tipped the S&P through the slipstream 5.000’s zone.

This has unsurprisingly lifted vols, which are now (teal) back above recent highs (Monday night, gray line. Statistical range = gray cone). We’ve also provided the term structure reading from Friday 4/19 (yellow), which was when the S&P was last at 5,000. As you can see, longer dated IV’s are still below that of 4/19, but <=5DTE are higher due to today’s data. We’ve also seen a shift in IV for Friday’s NFP & ISM, suggesting that the FOMC is not all that’s required to give an “all clear” to markets.

This creates an interesting scenario, as reactions to the Fed could be either reversed or reinforced with Friday’s data. This, in our view, creates the opportunity for large swings over the next few days. This, versus a large directional release into May OPEX.

We also wanted to flag Bitcoin, which is -10% over the last two sessions. We view bitcoin as a proxy for risk taking, an its now broken <60k to 57,500. Here we’ve plotted BTC vs ES futures, showing there is some correlation.

The concern here for bulls, is that <5,000 lurks predominantly put positions, which can been seen with the blue bars, below. As a baseline, we view these put-heavy zones as those in which volatility should materially increase.

Why?

The bizarre feature of recent market declines is that S&P volatility has “failed to realize”, meaning that SPX declines in April have been slow & controlled. We flagged this on 4/22, wherein the VIX had built up a large premium despite only being at 18 (note here). Under 5k, we think that changes, and realized vol starts to increase. Recall that a VIX of 16 simply reflects 1% average daily moves in the SPX – not exactly a high bar. If we lose support, long put buyers should step up & those that are short puts are likely forced to cover. These traders could therein invoke dealer short hedges.

Additionally, ten days ago, when we last tested 5,000, we saw correlation start to move higher which marked the unwind of flows which had dominated 2024 (read here). Traders bought the chip-dip last week (SMH rallied 10% from 4/19), but earnings are now likely to dent that bounce. Some are eyeing NVDA as the last hope, but they do not report until 5/22.

The takeaway from this is that it seems as the chip/AI leadership is now in question, and dip buyers are likely not to be as aggressive here. In our view <5k represents “loss of leadership” and the more complete unwind of flows, wherein correlation snaps higher.

Lastly, we are again at 5,000 but with fewer oversold conditions (note the IV chart above – IV’s are lower with SPX again at 5k).

Into the April selloff we flagged

put volume

vs

call volume

as a signal of oversold conditions (dashed vertical lines). We’re again back at 5,000, but put activity is relatively lower, suggesting less support at these S&P levels.

©2024 TenTen Capital LLC DBA SpotGamma