Macro Theme:

 

Short Term SPX Resistance: 5,200 (SPX Call Wall)

Short Term SPX Support: 5,150

SPX Risk Pivot Level: 5,100

Major SPX Range High/Resistance: 5,200 (SPX Call Wall)

Major SPX Range Low/Support: 4,800

• For the week of 5/5 we see few catalysts, which should lead to contracting volatility, and upside equity drift.
• 5,200 – 5,215 is major resistance into OPEX week.
• 5,165 (SPY 515) likely remains a key pivot level (support/resistance area) through 5/10
• On a larger time frame, 5,100 is short term support. A break <5,100 pushes the S&P into a more fluid zone, wherein 5,000 is major, long term support.

• 5/22 NVDA earnings, which follows 5/17 OPEX, should be a major turning point for equities.

*updated 5/7

 

Founder’s Note:

ES futures are flat to 5,205. NQ futures are -15bps to 18,168.

Key SG levels for the SPX are:

• Support: 5,165, 5,150, 5,100
• Resistance: 5,191, 5,200, 5,210
• 1 Day Implied Range: 0.58%

For QQQ:

• Support: 440
• Resistance: 445

IWM:

• Support: 202, 200
• Resistance: 210

Equities were broadly stronger yesterday, which means, for the Indexes, more positive gamma. This in turn should further tighten trading ranges, which should lead to lower realized volatility. Lower realized volatility allows for lower implied volatility, which adds supportive hedging flows.

Below is a basic gamma curve for SPX, and as you can see it peaks just after 5,200. This infers that the largest pocket of calls for SPX are positioned around 5,200. 5,200 is also the SPX

Call Wall,

our major resistance level. The SPY Call Wall is currently at 518, which lines up with SPX 5,200.

Below you can see gamma by strike, with 5,200 standing out due to its large call positioning (orange bars). For SPY the largest gamma strike is 515 (SPX 5,168), which is a support level for today, and a strike which we think remains in play for the remainder of the week.

With that, for today we are looking for the SPX to hold in the SPY 515 (SPY 5168) – 5,200 price area. For the remainder of the week we are looking for the SPX to churn in the 5,150 – 5,200 range. As per usual, if the SPX

Call Wall

rolls higher, we would raise the top end of our price range >5,200. It has been our view that the 5,200 – 5,215 (SPY 520) range would serve as a high into next week.

QQQ & IWM have a bit more room to their

Call Walls

, which are at 445 & 210, respectively. This implies they have a bit more upside potential at this juncture.

One of the few charts catching our eye today was that of VVIX, which has just plunged to match multi-year lows.

The VVIX is the “VIX of the VIX”, and measures the expected forward volatility of the VIX index. Specifically this indicates that traders expect stability in the volatility going forward, but one could also extract that this as meaning OTM VIX Calls have lost their bid. This is a key signal in this post-FOMC environment – traders see very little risk in the near term (~1 month). Demand for risk hedges has dissapated.

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We agree with this “low risk” view out into next week, after which we see some opportunity for volatility to relatively pick up.