Macro Theme:

 

 

Founder’s Note:

ES futures are +15 bps to 5,940. NQ futures are +30 bps to 20,740.

Key SG levels for the SPX are:

• Support: 5,577, 5,565, 5,550, 5,500
• Resistance: 5,583, 5,588, 5,600, 5,612
• 1 Day Implied Range: 0.62%

For QQQ:

• Support: 494, 490
• Resistance: 500

IWM:

• Support: 200, 190
• Resistance: 205, 210

Powell continues Congressional testimony today at 10AM.

Today’s picture remains little changed from yesterday – or the day before. The S&P is lodged between huge positive gamma from 5,600-5,625, with a big support node at 5,575 (SPY 555) and SPX 5,550. To bust out of this range we need a change in implied vol, or a change in options positions. The closest opportunity for a big change in position appears to be next weeks monthly OPEX.

For a change in vol, the market seems to not care much for Powell’s testimony, today. Tomorrow’s CPI & Friday’s PPI is where the attention rests, as you can see in the SPX term structure. A “non-event” from CPI & PPI likely gives the S&P the final boost up to 5,600-5,625, and QQQ 500. Any hot data that pushes the SPX <5,550 should invoke a test of 5,500. 5,500 is a big support line, and barring some multi-STDEV print, that is likely strong support into next Wednesday. Starting Wednesday we’ll likely be on watch for an OPEX “window of weakness”. That window of weakness could be exacerbated by many strange market relationships that we’ve recently outlined. Per this, we would be on high-alert if the SPX moves <5,500.

Lastly, in regards to “more upside”, we simply track the

Call Walls

. As of today we do not see the SPX Wall rolling up over 5,600, but SPY could easily flip to 560 (from 557, today). This has us eyeing 5,600-5,625 for a high. We also show the very big 500 QQQ Call Wall target, below. Friday afternoon is what we are targeting for a potential short term high in equities, assuming CPI/PPI are non-events. Those events passing without issue milk a final event-vol based vanna-boost from current volatility lows (i.e. IV drops and pushes equities up into the Walls). Those events play into a summer-Friday – and traders are unlikely to have hedge demand into that.

Next week we then confront OPEX position changes, starting with VIX exp on 7/17 the OPEX on 7/19. Those position changes will likely free up some space for volatility.