Markets are trading broadly from 3 pre-computed Levels which coincide with observed dynamic hedging levels. Additionally, commonly observed risk metrics like the 200 DMA also are a confluence of risk. These are 2578.25, 2617.25 and 2656.25. Broadly, we have been within a 100 point trading range for 2 weeks.
I am encouraged that last week given the extreme volatility we remained within the weekly option implied move of 65 points. Moreover, on Friday’s break, volatility nor our preferred observation of volatility, VVIX, didn’t expand markedly relative to the sell off.
For this week, the weekly option implied move in the SP500 is 69 points and the weekly magnet is 2610.
This week is dominated with potential catalysts from Fedspeak, FB CEO testimony, to earnings kickoff from important banks and a guide to the critical Financial Sector.
No doubt we remain a Tweet away from a 100 point move in the SP500. The Fed and Whitehouse have been talking the market down following January’s record setting start. A point not lost on many.
The usual trifecta of Bonds (Financials), Levels and Smart Orderflow remain our consistent edges.
Weekend review of hundreds of charts, proprietary levels, April seasonality, and cross-correlations, leaves me the most optimistic in over a month.
Above 2539, downside breaks are opportunities in anticipation of bank and technology earnings kickoff.
A fraction of my work product is attached.
All the best,