Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are up +15bps ahead of today’s OPEX.

Support is at 7,700 today, with resistance up at 7,775 then 7,800. This AM’s SPX expiration will clear out the bulk of SPX positive gamma (blue), however we’d expect that to be rebuilt after the 9:30 AM expiration, and as 0DTE traders step in. That said, the gamma map after 9:30 AM and going forward is primarily negative gamma, suggesting the SPX is setting up for further strong moves. We continue to want to be long of stocks while the SPX is > 7,690 Risk Pivot.

Vols continue to come in from Wednesday’s equity decline, which is a good sign for bulls.

Looking more specifically at tech, the NDX 12/31 skew is plotted today (teal) vs that same skew from Wednesday night (gray). The ~25 delta put area has come in a bit, as designated by the red bars beneath. More critically, the skew rests very close to the lows of its 90-day range (teal band). This suggests that traders are just not that worried about further selling. Should the SPX lose the Risk Pivot, and the equity selling broaden out – or if credit sparks, then we think that vols would lift materially and that put skew would steepen.

We continue to watch the idea of equity rotation vs a highly-correlated rotation out of stocks and into cash/bonds/etc. The former is arguably constructive for stocks while the later would be destructive.

Hammer ing this point home, you can see the highly correlated selloff into March-end as the Iran war started with RSP (equal weight SPX) vs SMH. Since October 6th the SMH is off nearly -15% while RSP is ~10%.

OPEX can often times be a turning point for stocks, and so we are on watch for a tech bottom as bearish tech positions are removed with OPEX. You can see below that this is a relatively small expiration for the S&P (top left), but a fairly sizable expiration for single stocks (top right).

This clearing of positions does play directly into earnings season, with META/TSLA/TXN kicking it off on 10/21 and the other mags reporting >=10/28.

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