Technical Indicator Summary Daily RSIs for the S&P 500 and Russell 2000 are in overbought territory (>70). Technical Review The June S&P 500 slipped -0.18% on Monday to settle @ 7148.00. According to Tier1 Alpha, option dealer gamma remains in positive mode as of Monday’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. If the June S&P 500 closes back below 6778, the option dealer gamma will flip back to the negative side. Market Outlook The S&P 500 finished slightly lower on Monday amid a bounce in oil prices and an unresolved war between the US/Israel and Iran. The S&P 500’s daily RSI is overbought (>70) for the second day in a row, implying that upside may be limited in the shortrun. Bullish flows from CTAs are winding down while Vol Control funds are about to turn more bullish if realized volatility levels continue to contract. That being said, if something bad happens in the Middle East that drives realized volatility higher, both CTA and Vol Control funds could flip back to sell mode. Our guess is that oil prices back above $100 could be the primary trip-wire for increased equity market volatility. For now, that is not the message we are getting from the oil market with front-month oil futures at $88.75. On Wednesday this week we get earnings from TSLA followed by INTC on Thursday. We do not expect earnings to matter much as long as the Middle East remains an open question. On Wednesday, April 29, we get earnings from MSFT, META, GOOG and AMZN. On April 30 we get AAPL. According to the CME’s FedWatch Tool, rate markets are pricing just a 0.5% probability that the Fed RAISES rates at its April 29 FOMC meeting (this may be the last FOMC meeting of the Jerome Powell era). Rate markets are saying there is a zero chance of a rate cut on April 29.

Technical Indicator Summary Daily RSIs for the S&P 500 and Russell 2000 are in overbought territory (>70). Technical Review The June S&P 500 soared +1.19% on Friday to settle @ 7161.50. Hedgeye’s risk range on Wednesday’s session was 7136 at the top and 6761 at the bottom (red lines on the chart above). Option dealer gamma remains in positive mode 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. If the June S&P 500 closes back below 6778, the option dealer gamma will flip back to the negative side. Market Outlook Next week, option dealer gamma exposure drops to its cyclical low and price action is less influenced by option dealer hedging activity. According to Tier1 Alpha, price action in the wake of the monthly options expiration tends to be more organic, increasing the odds of countertrend move in the index. On Friday we saw conflicting posts from President Trump and Iranian representatives regarding negociations or lack thereof. We have no idea what happens next in the Middle East, but oil and equity futures appear to be expecting a peaceful outcome. With daily RSIs > 70, it would not take much to make the S&P 500 drop next week. According to the CME’s FedWatch Tool, rate markets are pricing just a 0.5% probability that the Fed RAISES rates at its April 29 FOMC meeting (the last FOMC meeting of the Jerome Powell era). Rate markets are saying there is a zero chance of a rate cut on April 29.

Technical Indicator Summary Daily RSIs for the S&P 500 and Russell 2000 are in neutral territory (>30 and <70). Technical Review The June S&P 500 eked out a +0.23% gain on Thursday to settle @ 7077.00. 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. If the June S&P 500 closes back below 6778, the option dealer gamma will flip back to the negative side. Market Outlook A bounce in the US Dollar Index, a 2.5% rally in WTI crude oil and a daily RSI that briefly rose above 70 during Thursday’s session all were headwinds for the S&P 500 on Thursday. Flows from systematic funds were mildly bullish. Friday is the monthly options expiration with nearly $1.9 trillion in notional option value set to expire (or be rolled forward). The monthly options expiration can mark an inflection point for the S&P 500. Next week, option dealer gamma exposure drops to its cyclical low and price action is less influenced by option dealer hedging activity. Price action in the wake of the monthly options expiration tends to be more organic, increasing the odds of countertrend move in the index. According to the CME’s FedWatch Tool, rate markets are pricing just a 0.5% probability that the Fed RAISES rates at its April 29 FOMC meeting (the last FOMC meeting of the Jerome Powell era). Rate markets are saying there is a zero chance of a rate cut on April 29.