Macro Theme:

Key dates ahead:

Founder’s Note:

ES is at 7,004 this morning — touching the all-time high of 7,002 set Jan 28. SPX closed at 6,967 yesterday (+1.18%), its 9th gain in 10 sessions. VIX at 18.26. Oil is pulling back to $93 despite the Hormuz blockade being fully operational — no ships got through in the first 24 hours.

NOTE: VIX expiration is this AM at 9:30AM EST. Be on watch for possible large unusual SPX/ES swings around the open.

Short term we are looking for a mild correction/pullback. Long term the oil pullback is the tell, with the market currently pricing in a deal. Trump signaled that the next round of US-Iran talks “could happen in the next two days.” If that materializes, oil goes back to the 80s and SPX likely pushes into 7k’s. Next week we see big tech earnings start to pick up.

We yesterday flagged today as a very large VIX expiration, and here is the “VIX Cliff”. The idea here is that the vol crush could very well have been reinforced by this VIX expiration, and so the removal of these VIX contracts could remove that vol-suppressing force.

TRACE shows an interesting positive gamma reduction at the 9:30 AM EST open, and those contracts are likely a Flex/OTC contract related to VIX expiration.

When we look out in time, you see the positive gamma sharply reduces following today (less light blue).

As traders crushed the Index vol, they have rabidly chased into single stock calls. You get a feeling for this by looking at the current Compass, which shows a dispersion of top names from what was the lower left (bidding puts) to the upper right (chasing calls). Of particular note is NVDA, which went from very cheap and put-weighted, to still pretty cheap, but call weighted. You can frame this as “too much too fast”, and single stocks are not as exciting as they were a few days ago. To us, this lines up well with a “need for correction” into this OPEX window, which is also technically stretched.

Let’s frame this another way: look at those call volumes and PC ratios: all “green” which shows the chase.

Earnings:

Yesterday’s bank results were a trading-desk blowout. JPM reported $5.94 EPS (beat $5.45), with record trading revenue of $11.6B (+20% YoY). Citi posted its best returns in five years, with record equities revenue of $2.1B (+39%). The war has been Wall Street’s ATM. But JPM lowered its NII guidance from $104.5B to $103B, and Dimon’s tone was cautious — the “beats” are in trading, not core banking.

This morning: BAC is up 1% premarket on a 17% profit rise. Morgan Stanley reports before the bell — watch their equities desk given GS and Citi set records. ASML also reported strong, driven by AI demand.