Macro Theme:

 

 

Founder’s Note:

Futures are up +1.5% after the Friday EU tariff threats were pushed off for several weeks.

That very unstable overnight ES +1.5% is a realized vol of ~25% – and an unwind of the slide lower following the 20Y auction and Friday’s tariff-tweets.

The rally pushes SPX back to this key

pivot

area of 5,900 wherein the June Quarterly exp JPM call (5,905) & a 5/30 exp large 5,925 positive gamma strike sit (dealers are long the 5,925 x 5900 6/30 put spread). While these positions are in place we watch for the SPX to respond to this level. We’d add that its importance of this zone increases into end-of-June as local gamma increases around 5,900.

The takeaway here is that “all else equal” moving to 5,900-5,925 is the path of least resistance, particularly for today into NVDA ER. Above 5,925 there is no real resistance above, and so we would look to be long SPX above that level with a price target of 6k.

To the downside we see no major positive gamma support until ~5,725. This indicates that a shock-tweet or other trigger could flush SPX down into that zone with relatively short notice in 15-20 mins. We will continue to recommend carrying 1-2 week out tail puts (5,750 – 5,700 zone), as they have been paying with consistency. We do think you have to be actively trading them – meaning closing/rolling those put positions when the market is in the midst of one of those -100 handles in 15 min moves.

Friday’s move lower has knocked options pricing back in favor of puts, as you can see on the Compass. While we do see futures up strongly this AM, the question now becomes “can bulls find another catalyst?”

One could argue there is some vol premium to squeeze out and lift stocks – and while we’d of course rail against the merit of shorting vol here that does not mean the market will take their swing and shorting it. The meat of that vol is going to be tied to events later this week.

The obvious catalyst is NVDA’s earnings tomorrow night – with the hope with that it generates an AI risk-on bat signal. There are also Jobless Claims Thurs (which groups with the NVDA ER reaction from Wed PM) and a big PCE print on 5/30 (Friday). If those all pass with bullish tilts, then we would stabilize above 5,925 and lift into June OPEX.