Key insights
- The market is experiencing choppiness ahead of the CPI release, with positioning showing some improvement but still skewed negatively. The author anticipates potential White House intervention with positive war-related headlines to frame inflation data. Market maker exposure has shifted more bullishly, suggesting a potential quick move if SPY breaks $740. VIX resistance at 20 and a lower term structure are positive signs, but the market likely remains range-bound until the CPI data is released.
Not a lot of action today with the SPY remaining pinned below the $740 level mentioned in yesterday’s post about how the market panic is looking overdone.
Options market positioning has improved a bit, but still remains skewed to the downside, which is not surprising given the upcoming CPI data.
I do believe that the US administration is going to try to push out positive headlines regarding the war today or tomorrow prior to the release of the inflation numbers if it's going to overshoot, so the number is framed as “it’s hot now, but will recede as the conflict is near a resolution,” and not as a high reading with high uncertainty.
So I will be closely watching what info comes from the White House prior to the release.
Market maker exposure has shifted more significantly and more bullishly and if $740 is overcome, the move toward $745 is likely to be quick.
For now we are likely looking at a choppy market between $735 and $745 and this is likely to remain the case until tomorrow’s CPI is released.
On the VIX, main resistance remains 20, and market positioning is skewed to the negative, as you can see from the nodes pointing to the left.
So VIX is likely to remain pressured until tomorrow, when we’ll reassess. Term structure has also shifted lower aggressively, and the July expiry is priced lower than June. This is positive.
Yesterday, I mentioned SMH and that market makers are likely to provide support at $550–$560, and that there was not much positioning below that. It’s now trading at $600, which is a very important level to overcome. Might need a catalyst to push through though.
The SOXX ETF, which is the broader semiconductor ETF, got hit with some bullish flow and has managed to overcome the $570 resistance, in addition to moving into a positive vol regime, meaning that market makers are going to subdue volatility.