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 ended fractionally higher on Friday, settling @ 6753.75. Lower Bollinger band support is 6633. Upper Bollinger band resistance is 6951. According to Tier1 Alpha, option dealer gamma remains negative 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. Market Outlook In Friday’s trade alert, while the S&P 500 was down more than 1%, we included the following market note: According to Tier1 Alpha, today is the first day that systematic vol control funds will turn into net buyers (up to $40 billion in of ES futures exposure) versus sellers since the October 10 volatility spike. This would be negated if the S&P 500 dropped more than 2.5% today. That's a strong bullish flow that can absorb a lot of selling. Option dealers are currently in a negative gamma regime, so their buying or selling is market path dependent. Option dealers will mechanically sell weakness and buy rallies today to maintain neutral market exposure. In other words, if the ES turns green, do not be surprised if a strong rally ensues with both vol control funds and option dealers both on the buy side. This is all about market structure and nothing to do with fundamentals. The S&P 500 did not turn green until the final minutes of trading on Friday, but finished the day nearly 100 points off of session lows. Systematic vol control buying is likely to continue next week unless there is a huge spike in realized volatility. Since option dealers are still dealing with negative gamma conditions, that means that option dealer activity will be path dependent, selling weakness and buying strength. If vol control funds and stock buybacks push equities higher next week, option dealers will be forced to buy futures as well. If lightening strikes and the federal government finally re-opens, then a rally back to all-time highs would not be a surprise. According to the CME’s FedWatch Tool, there is a 66.6% probability that the Fed cuts rates by 25 bps on December 10.

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 bounced +0.34% on Wednesday, settling @ 6825.25. Lower Bollinger band support is 6606. Upper Bollinger band resistance is 6965. Option dealer gamma remains in positive territory 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 The federal government remains closed and the Supreme Court heard arguments on Wednesday regarding the legality of president Trump’s IEEPA tariffs. At some point, we think sooner rather than later, the federal government will re-open. That is likely the next bullish catalyst for US equities. It is much more difficult to predict how markets might respond if the Supreme Court invalidates some of Trump’s tariffs. Either way, both events are likely to be meaningful for US equities. Trends remain bullish for the S&P 500, Nasdaq 100 and Russell 2000. In fact, the macro outlook gets more bullish the closer we get to 2026. Overnight action leading up to Wednesday’s trading session saw all three aforementioned US indices test the lower boundaries of their respective Hedgeye risk range. According to the CME’s FedWatch Tool, there is a 61.5% probability that the Fed cuts rates by 25 bps on December 10.

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 +0.27% on Friday, settling @ 6874.00. Lower Bollinger band support is 6605. Upper Bollinger band resistance is 6951. Option dealer gamma remains in positive territory as of Friday’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 The federal government shutdown is set to bite this weekend as the food stamp program is expected to lose funding on Saturday unless Congress can get its act together. Air traffic controllers and other federal employees are also at risk of not being paid. Our guess is that either enough democrats relent and vote to re-open the government or republicans simply eliminate the filibuster to break the logjam. Will democrats and republicans continue to play games and risk civil unrest? Beyond the shutdown, seasonal tendencies turn more bullish starting next week as more companies emerge from their stock buyback blackout period. So far, earnings are running well ahead of expectations. With 200 S&P 500 companies reporting coming into Friday, S&P 500 earnings are up +12% YoY versus consensus expectations of +8%. With 621 Russell 2000 companies reporting, Russell 2000 earnings growth is +19% YoY.