| SPX – 200 day moving average perfection | | This could actually become the textbook reversal. You don’t buy into longer term trend lines and the 200 day moving average. Supports that matter are: 4200 and the 4100 area. |  Refinitiv |
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| SPX – the short term view | | SPX fell below the short term trend channel that had been in place since mid July. Resistance levels are 4260 and recent highs at 4320. Supports are 4200 and then the 4100 level. |  Refinitiv |
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| NASDAQ – another perfect reversal? | | NASDAQ reversed right off the negative trend line. First real support is at 12900. Noteworthy is the negative divergence in the RSI. |  Refinitiv |
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| Kostin travelled to arrive | | King Kostin: “The S&P 500 has reached our year-end target of 4300 four months ahead of schedule. Looking ahead, upside risks to the index seem limited given this macro backdrop. But downside risks loom….” (GS head of strategy) |
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| The pillars the squeeze stood on… | | MS US Chief Equity Strategist Mike Wilson highlights that the surprising magnitude of this bear market rally has been driven by a combination of better than feared 2Q earnings, light positioning, and continued hope for a less hawkish Fed path. Maybe these support pillars are starting to “crumble” now. Q3/Q4 and 2023 numbers are starting to get revised down, positioning is not as “light” as 6-8 weeks ago due to massive short-covering and CTA buying and lastly, while inflation appears to be peaking, it’s not likely to come off at a pace fast enough to spur the type of sustained Fed pause the equity market is already discounting (Morgan Stanley) |
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| VIX looks so tiny – FX vol edition | | The most recent move in FX volatility is actually huge. VIX was up on Friday, but there is much more potential for VIX to move as equity people realize that “systematic” funds chase momentum and the fact cross asset vols have picked up lately… |  Refinitiv |
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| The bitcoin “connection” | | If crypto still is a good indicator of the “aggregate” psychology of the market then you should pay close attention to the latest px action in the “crypto majors”. The BTC vs NASDAQ correlation perfection is less perfect these days, but it revived on Friday. Third chart shows NASDAQ vs ETH. |  Refinitiv |  Refinitiv |  Refinitiv |
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| Systematics – short gamma, but no theta? | | Systematic strategies have traded like they are running huge short gamma, but they have not received any theta. Most of these strategies are trend/momentum based, and when there is no real trend, they end up pressing lows and chasing highs. We have seen huge buys from this crowd over past weeks, but they are running out of dry powder…just in time when people decided to front run even more buying. |  GS |
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| They can sell as well | | CTA momentum chasing works both ways. Things could get “nasty” if the CTA community starts reversing the latest buy flow. Reshuffling risk is not overly easy at the moment, especially not if you want to do it quickly. Scott Rubner on the CTA flow from here: “$13B to Buy over the next week in a flat tape ($3.3B in S&P) / $17B to buy over the next month ($5.7B in S&P)… -Over the next month…Up big tape $48B to buy…Down big tape $147B for Sale…“ |  GS |
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| Ready for VIX | | Gentle reminder about the VIX seasonality. |  Equity Clock |
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| This buyer is slowing | | Gentle reminder via Scott Rubner about the corporate buyers: “…Corporate blackout window begins on Sept 15th – one of the biggest buyers in the market slows – reminder they have 10b5.1 plans in place but pace reduces by about 1/3” |
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| Short pain in a pic | | The latest short covering has been extreme. As GS outlines: “On a percentage basis, the cumulative 20-day covering from 7/20 to 8/16 is still very large and ranks in the 99th percentile – omitted the 17th and 18th as we’ve seen modest “re-shorting” in the past two sessions.” Max pain market continues… |  GS PB |
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| Bulls beware | | Goldman’s positioning indicator is way off extreme lows and actually at one of the least extreme levels of all of 2022. The GS “Sentiment Indicator” measures stock positioning across retail, institutional, and foreign investors versus the past 12 months. |  Goldman |
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| Talk the bearish talk…. | | ….but maybe not walk the bearish walk……Investors say they are extreme bearish in surveys, but still have relatively high portfolio allocations to equities and are still running elevated leveraged positions. It’s like listening to the “All In” podcast – they have been hysterically bearish now for a while, but they are all intrinsically long…. |  Top Down Charts |
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| Never forget – we move into short gamma on sell offs | | We had a relatively big “gamma roll off” post this expiration, the “stabilizer” is gone. Don’t forget that we also flip into short gamma should the market move lower. Absolute levels to the downside are not big at the moment, but demand for downside protection could “kick in” again, leading to vol becoming bid, dealers selling deltas to delta hedge and the entire short gamma dynamics play out again. |
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