Technical Indicator Summary Daily RSIs for the S&P 500 and Russell 2000 are in neutral territory (>30 and <70). Technical Review The March S&P 500 sank -1.53% on Thursday, settling @ 6677.50. The VIX closed at 27.29 on Thursday. When the VIX goes above 29, the S&P 500 moves into crash mode. Option dealer gamma remains in negative mode as of Thursday’s close. When option dealer gamma is negative, option dealers mechanically SELL weakness and BUY strength to hedge their exposure. Negative gamma for option dealers increases the odds of HIGHER realized volatility and LARGER percentage moves up or down from one day to the next. Market Outlook The situation in the Middle East continues to spiral and WTI oil futures jumped 10% on Thursday to close above $96 per barrel. CTAs are now selling S&P 500 equity exposure. The same can be said for systematic vol control funds, with estimates of approximately $20 billion sold in long equity exposure on Thursday. And for the trifecta, option dealers are mechanical sellers in a down market when they are in negative gamma. As you can see below, CTAs could still sell more (and even get net short the S&P 500). According to the CME’s FedWatch Tool, rate markets are now pricing a 6.9% probability that the Fed cuts rates by the April 29 FOMC meeting (the last FOMC meeting of the Jerome Powell era). There is also an FOMC meeting on March 18 where odds of a rate cut are now 0.8%.

Technical Indicator Summary Daily RSIs for the S&P 500 and Russell 2000 are in neutral territory (>30 and <70). Technical Review The March S&P 500 finished fractionally lower on Wednesday, settling @ 6779.50. Option dealer gamma remains in negative mode as of Wednesday’s close. When option dealer gamma is negative, option dealers mechanically SELL weakness and BUY strength to hedge their exposure. Negative gamma for option dealers increases the odds of HIGHER realized volatility and LARGER percentage moves up or down from one day to the next. Market Outlook The S&P 500 continues to react to the price of oil, nearly tick for tick. Unfortunately, it appears that the war with Iran is beyond the control of the USA or Israel to stop. We don’t know what happens tomorrow in the Middle East, but the reality is slowly setting in that it is likely to get worse before it gets better. As a result, higher oil prices from here are likely, and that is a significant risk for US equity markets. While the Middle East dominates the headlines, private credit markets appear to be cracking in a way reminiscent of the 2008 financial crisis. Any further flare up in in equity market volatility has the potential to unleash a significant unwind (selling) from CTA strategies. As if that was not enough, global macro indicators suggest stagflation over the next 6 months. So, buckle up for a bumpy ride! According to the CME’s FedWatch Tool, rate markets are now pricing a 12.9% probability that the Fed cuts rates by the April 29 FOMC meeting (the last FOMC meeting of the Jerome Powell era). There is also an FOMC meeting on March 18 where odds of a rate cut are now 0.6%.

Technical Indicator Summary Daily RSIs for the S&P 500 and Russell 2000 are in neutral territory (>30 and <70). Technical Review The March S&P 500 slipped -0.20% on Tuesday, settling @ 6787.25. Option dealer gamma remains in negative mode as of Tuesday’s close. When option dealer gamma is negative, option dealers mechanically SELL weakness and BUY strength to hedge their exposure. Negative gamma for option dealers increases the odds of HIGHER realized volatility and LARGER percentage moves up or down from one day to the next. Market Outlook We are hearing that Iran continues to pound Israel with missiles as air defenses are either out of missiles or have been destroyed. It is not surprising that Iran is not interested in a ceasefire at this point in time. As a result, it does not appear as if president Trump is in a position to declare victory and end the war. In summary, geopolitical uncertainty remains high. Trend signals have turned bearish across the board for the Nasdaq 100, S&P 500 and Russell 2000. Any further flare up in in equity market volatility has the potential to unleash a significant unwind (selling) from CTA strategies. As if that was not enough, the global macro landscape suggests stagflation over the next 6 months. So, buckle up for a bumpy ride! According to the CME’s FedWatch Tool, rate markets are now pricing a 12.9% probability that the Fed cuts rates by the April 29 FOMC meeting (the last FOMC meeting of the Jerome Powell era). There is also an FOMC meeting on March 18 where odds of a rate cut are now 0.6%.