The S&P 500 is only down 13 points on the session. In the context of what we’ve seen lately, that’s massively unchanged.
Do not let your guard down.
The options market is pricing in a $224 expected move on the week. The actual move so far is 30 points. The week opened at 6,740 and we’re sitting at 6,770 right now.
That kind of compression tells you the market is coiled. It’s waiting for a catalyst, and the catalysts are stacked up on Friday’s calendar: durable goods, GDP, PCE, consumer sentiment, and JOLTS all land on March 13th.
Even the Friday expiration alone still carries nearly a $100 expected move with only two sessions left. That is significant.
Here’s what I’m watching in tonight’s video:
- The VIX is sitting in an intense zone at 24 to 25, volatility futures remain in backwardation, and the VVIX is printing 123. Nobody is giving up their hedges.
- Downside convexity is the defining feature of this tape. A rally gets us back to 7,100. A breakdown takes the S&P to the low 6,000s. That’s roughly 300 points of upside versus 700 points of downside risk.
- The S&P is only 3.5% removed from its all time high. The peak to trough selloff so far has been about 5%. This market hasn’t even begun to sell off in any meaningful way.
- Financials are oversold after breaching the expected move to the downside for multiple consecutive weeks. I see a short term bounce trade targeting a move back to the 51 to 52 level.
- I have a spread on Microsoft positioned for a retest through the $400 level, and a bounce and fade trade on FXI where sell side activity has been dominant.
Spreads are the strategy right now. You don’t have to be right on direction. You just have to be in trades and let the volatility work in your favor.
