Technical Indicator Summary Daily RSIs for the S&P 500 and Russell 2000 are in neutral territory (>30 and <70). Technical Review The September S&P 500 bounced +0.80% on Friday, settling @ 7659.50. Hedgeye’s risk range for the Sept. futures contract coming into Friday’s session was 7736 at the top (lower high) and 7571 at the bottom (red lines on the chart above). The VIX finished Friday’s session near 15.85. Option dealer gamma finished in neutral territory as of Friday’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. 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 Energy prices pulled back on Friday even as Saudi Arabia’s oil infrastructure came under heavy attack. A pumping station on Saudi’s East-West pipeline was attacked by drones from Iranian backed militants in Iraq and destroyed. The East-West pipeline handles up to 7 million barrels per day and was the only outlet for Saudi crude oil exports outside of the Strait of Hormuz, which is effectively closed. Why are US oil prices not already at $150 or higher? The August CPI came in at 3.40%, matching Wall Street expectations of 3.4% and at the low end of Hedgeye’s expected range of 3.39% to 3.61%. Rate hike odds actually increased to 86.5% even though there has been no signal from Fed officials of a rate hike. Fed Chairman Warsh does not like giving forward guidance, so rate hike odds should be closer to 50/50 unless somebody is manipulating the odds or has insider knowledge. We think a rate hike now would be akin to the Fed’s rate hike mistake that preceded the 2008 financial crisis. Our guess is that the Fed holds rates steady next week, but you can never be sure when politics play a part in the decision process. Probably a bigger risk than a rate hike for equity markets would be a further spike in petroleum prices. Diesel is already retailing at $9.99 per gallon in some areas across the country. With Saudi Arabia’s oil infrastructure under attack from all sides, Iran and its proxies are doing everything they can to stick it to the Trump administration ahead of the US miderm election. Realized volatility remains low on a close-to-close basis, for now. In other words, as long as the S&P 500 rises or falls less than 1% each day, Vol Control funds remain bullish. However, Vol Control funds have not rebuilt their long equity position to the same extent as CTA funds who are near max long equities (S&P 500 futures). Some momentum-based CTAs have already begun selling, but a major unwind of long S&P 500 futures has yet to commence. CTAs are mostly trend followers, so a further drop in the S&P 500 will eventually turn CTAs into sellers which would likely ramp realized volatility higher and trigger sales from Vol Control funds as well. The S&P 500’s position isn't yet bearish, but does appear susceptible to weakness. Next week’s FOMC decision and energy prices are potential catalysts. According to the CME’s FedWatch Tool, rate markets are pricing a 86.5% chance that the Fed hikes rates by 25 bps at its September 16, 2026 FOMC meeting.

Technical Indicator Summary Daily RSIs for the S&P 500 and Russell 2000 are in neutral territory (>30 and <70). Technical Review The September S&P 500 lost -0.59% on Thursday, settling @ 7598.50. Hedgeye’s risk range for the Sept. futures contract coming into Thursday’s session was 7764 at the top (lower high) and 7606 at the bottom (red lines on the chart above). The VIX finished Thursday’s session near 18.07. Option dealer gamma remains negative 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. 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 NYMEX petroleum prices surged 6% to 7% on Thursday as events in the Middle East continue to spiral out of control. Higher energy prices stoke inflation fears and worries that the Federal Reserve might hike the short-term federal funds rate as soon as next week. Consensus expectations for Friday’s August CPI report are centered near +3.4% YoY. The August CPI report is that last major inflation report before the FOMC meets on Wednesday, September 16. Despite a red tape, realized volatility remains low on a close-to-close basis, for now. In other words, as long as the S&P 500 rises or falls less than 1% each day, Vol Control funds remain bullish. However, Vol Control funds have not rebuilt their long equity position to the same extent as CTA funds who are near max long equities (S&P 500 futures). CTAs are mostly trend followers, so a further drop in the S&P 500 will eventually turn CTAs into sellers which would likely ramp realized volatility higher and trigger sales from Vol Control funds as well. With option dealers in negative gamma, higher volatility in the days ahead is increasingly probable. In other words, the S&P 500 is in a precarious position with oil breaking out above $100 and poised to test higher levels in the days/weeks ahead. According to the CME’s FedWatch Tool, rate markets are pricing a 71.1% chance that the Fed hikes rates by 25 bps at its September 16, 2026 FOMC meeting.

Technical Indicator Summary Daily RSIs for the S&P 500 and Russell 2000 are in neutral territory (>30 and <70). Technical Review The September S&P 500 dropped -0.48% on Wednesday, settling @ 7643.75. Hedgeye’s risk range for the Sept. futures contract coming into Wednesday’s session was 7773 at the top (lower high) and 7610 at the bottom (red lines on the chart above). The VIX finished Wednesday’s session near 16.45. Option dealer gamma flipped into negative territory 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. 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 For the second day in a row, surging energy prices overwhelmed buying from Vol Control funds to keep the S&P 500 in the red all day. Without Vol Control buying, Wednesday’s weakness may have been much worse. Option dealer gamma has flipped negative which increases the odds of higher realized volatility in the days ahead. On Thursday we get weekly energy inventories which could be another bullish catalyst for the energy complex. Consensus expectations are for Friday’s August CPI report is +3.4% YoY. The August CPI report is that last major inflation report before the FOMC meets on September 16. According to the CME’s FedWatch Tool, rate markets are pricing a 60.2% chance that the Fed hikes rates by 25 bps at its September 16, 2026 FOMC meeting.