Technical Indicator Summary Daily RSIs for the S&P 500 and Russell 2000 are neutral (>30 and <70). Technical Review The December S&P 500 added +0.22% on Thursday, settling @ 6907.25. Lower Bollinger band support is 6583. Upper Bollinger band resistance is 6981. According to Tier1 Alpha, option dealer gamma remains in positive mode as of Thursday’s close. When option dealer gamma is positive, option dealers mechanically buy weakness and sell strength to hedge their exposure. Positive gamma for option dealers increases the odds of LOWER realized volatility and SMALLER percentage moves up or down from one day to the next. Market Outlook After Wednesday’s close, Oracle reported an earnings disappointment that triggered a -1% sell-off in the overnight S&P 500 futures market. The rationale behind the overnight move was that Oracle might be a sign that the AI bubble might be popping. During Wednesday’s session, however, it was a broad-based rally that overcame weakness in AI-related tech stocks to lift the S&P back into the green. Hedgeye argues that the strength in small-cap Russell 2000 index is a preview of bullish Quad 1 conditions in Q1 2026. The overall set-up remains bullish. According to the CME’s FedWatch Tool, rate markets are pricing an 24.4% probability that the Fed cuts rates by 25 bps on January 28.

Technical Indicator Summary Daily RSIs for the S&P 500 and Russell 2000 are neutral (>30 and <70). Technical Review The December S&P 500 jumped +0.64% on Wednesday, settling @ 6891.75. Lower Bollinger band support is 6585. Upper Bollinger band resistance is 6976. According to Tier1 Alpha, option dealer gamma remains in positive mode as of Wednesday’s close. When option dealer gamma is positive, option dealers mechanically buy weakness and sell strength to hedge their exposure. Positive gamma for option dealers increases the odds of LOWER realized volatility and SMALLER percentage moves up or down from one day to the next. Market Outlook In addition to cutting the federal funds rate by 25 bps on Wednesday (as expected), the Fed also announced a new QE program. After Wednesday’s dovish FOMC meeting, what is standing in the way of the S&P 500 making a push for 7000 by the December 19 options expiration? According to Tier1 Alpha, 30-day realized volatility is about to fall below 90-day realized volatility as soon as Friday. That is a buy signal for systematic vol control funds, strengthening bullish tailwinds into year-end. According to our global macro research, Q1 2026 is setting up as favorable to the economy and US equities. Meanwhile, CPI inflation likely peaked in November (but we won’t know that for a while thanks to delayed government data). According to the CME’s FedWatch Tool, rate markets are pricing an 22.1% probability that the Fed cuts rates by 25 bps on January 28.

Technical Indicator Summary Daily RSIs for the S&P 500 and Russell 2000 are neutral (>30 and <70). Technical Review The December S&P 500 edged -0.11% lower on Tuesday, settling @ 6848.25. Lower Bollinger band support is 6586. Upper Bollinger band resistance is 6973. Option dealer gamma remains in positive mode as of Tuesday’s close. When option dealer gamma is positive, option dealers mechanically buy weakness and sell strength to hedge their exposure. Positive gamma for option dealers increases the odds of LOWER realized volatility and SMALLER percentage moves up or down from one day to the next. Market Outlook Another low volatility day for the S&P 500 adds to a series of lower realized volatility trading sessions which should trigger systematic vol control strategies to mechanically buy S&P 500 futures. With the VIX well below 19, the near-term set-up for the S&P 500 remains bullish barring an unexpected spike in realized volatility. Keep in mind that the mean reverting effects of positive option dealer gamma conditions reduces the odds of a volatility spike as described above. Rate markets are convinced that the Fed will cut the federal funds rate by another 25 bps on Wednesday. We cannot recall the last time that the Fed surprised markets, but you never know, especially if politics are involved. The odds of US military action against Venezuela is rising in the days ahead, so that is a short-term wildcard for both equities and energy markets. Other than the risks associated with the Fed and Venezuela, the S&P 500’s set-up remains bullish. December 19 is the largest options expiration of the year and the S&P 500 is tantalizingly close to the 7000 mark. As a result, we would not be surprised if we see a push for 7000 after Wednesday’s FOMC announcement given all of the tailwinds supporting the bull case. According to the CME’s FedWatch Tool, rate markets are pricing an 87.4% probability that the Fed cuts rates by 25 bps on December 10.