Macro Theme:

Short Term SPX Resistance: 5,065 (SPY 505)

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 +50 bps to 5,075. NQ futures +75 bps to 17,569.

Key SG levels for the SPX are:

• Support: 5,015 (SPY 500), 5,000, 4,980
• Resistance: 5,050, 5,075, 5,100
• 1 Day Implied Range: 0.63%

For QQQ:

• Support: 420
• Resistance: 426, 430

IWM:

• Support: 195, 190
• Resistance: 200, 201

Jobless Claims, Unit Labor Costs 8:30 AM ET

4 & 8 week Tbill auction 11:30 AM ET

Post close: AAPL earnings

It was a wild session yesterday, which highlighted the transient “slip-streamish” nature of the 5,000-5,100 range. We’ve previously flagged this as a feature of this range which has been traversed many times over the last several sessions. We did see some positions start to fill in around 5,050 & 5,065 (SPY 505) yesterday, which may slow progress back up through that range if equities rally, today.

Recently we highlighted how IV’s picked up related to tomorrow’s NFP & ISM PMI data points. The data suggested to us that the FOMC might not be a release-point for markets, as traders are demanding to see data rather than listen to Fed narratives. Consider this quote from the WSJ:

“Powell can say whatever he wants, but ultimately the inflation numbers will dictate what happens,” said Neil Dutta, head of economic research at Renaissance Macro Research.

Accordingly, we turn to implied volatility as a source of truth. The truth being data that not only depicts how relevant the market thinks an upcoming data point is, but allows us to evaluate reactions to said data, too.

As we can see here, the SPX IV’s are quite elevated for tomorrows expiration. This informs us that we can likely anticipate some drift today, before being served up a final catalyst tomorrow.

Into next week, the takeaway here is that we think its going to take a real push to move us either above 5,150, or down through 4,975.

The upside scenario:

While short term vols are elevated, longer dated vols are fairly benign, and so vanna is not a material, long term driver to the upside. We saw call sellers come in around the 5,150 area earlier this week, and we suspect they would come back out if the S&P rallies back into that zone. That area may lock us in <=5,150 through 5/17 OPEX. Following 5/17 OPEX, we have NVDA’s earnings on 5/22, which is a major upside catalyst.

The downside scenario:

We have viewed, and continue to view 5,000 as major, long term support due to sizeable gamma positions at that strike. Something has to really force selling to provoke a move down through 4,975, which is the JPM collar long put (dealer short put) strike. Often in a true negative gamma scenario some natural sellers come out and get the ball rolling, and derivative dealers come in, adding short selling flows that speed up the downside. That’s just not the case here. Further, on downside moves implied vols are sluggish suggesting a lack of hedging demand, and 5,000 is accordingly sticky. For this reason, we think that a full short signal is only a break of 4,980, which may then lead to a test of 4,800. The downside momentum <4,975 would be driven by several factors, all laid out in detail here.