SPY/SPX - $8 Billion Press to Downside Protection - 4X Expiry

10 ก.ย. 2022

Institutional Protection (Hedging) reached an All-Time High on the September 16th
Quad Witch Expiration.

This position dwarfs prior hedging Highs by 103% and is rising by an additional $8 Billion
added to the hoard of Puts Friday.

Not only are the positions outsized - it was 308% of 2008's Hedging.

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Intense Volatility will return in September.

Of Note, with the declining Volatility Complex, VX Hedging has not dropped within a
concurrent Cost Correlation.

Options Writers are set for 3.19% IV for September... which may portend significantly Higher VX
on any significant change in arrangements.

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On to the SPX/SPY and what is ahead. Of Note, I am Using the SPX as Large traders and
Institutions are most heavily positioned here. Levels for the SPY are contained below.

Trader Sentiment began the Week at 18.1% Bullish & 53.3% Bearish for the next 180 Days.

ISM Price Paid Component declined 34.6% on the latest print as Commodity Intermediate
Inputs have declined significantly.

Interest Rate Forwards are indicating the FOMC will be @ 4% by January. The short end of
the Curve continues to confirm the Fed Fund Futures. The DX took a breather on the Effective
Rate Tussle between the EU and US.

Powell will not do anything less than 75Bps and should the CPI be above 8.1 - 8.2, odds favor
Powell stepping up the odds of 100 BPS, anything below 8 and 75Bps will be the LIS. The
Fed is "data dependent" - ie. they bought themselves time and have already indicated it
will be, at minimum, several months of observing the Data and not one nor two.

Market Internals were solid with 90% Up, 10 :1 Advance peaking at 17 : 1 Intraday. Breadth
improved as well, not significantly, but an improvement pushing the Closing Basis above the
10-Week Moving Average. Friday's rally was broad as was Wednesday's.

NQ's Up/Down was higher as well, with a slight broadening after coming very close to putting
in a lower low.

The Put/Call ratio fell from 1.01 on Tuesday to .80 on close Friday - a 3-day decline.

The ViX has 19.46 wide open again as we move into Roll through Settle, expect a surprise
soon. It is ahead. The VVIX came up to its Pivot and failed badly.

Extreme awareness of the UST Curve and Futures is vital to success as we are seeing 4%
come into our view. DX, same considerations, the Ball is in Powell's court now that LeGarde
has made her tit for tat. FX Disruptions were not considered not all that long ago. I pointed
out they would be arriving shortly back in August of 2021. Very large disruptions were
promised and delivered. 100% Ditto Bonds and their impending implosions.

Dung was Flung then, not so much now and it is quite far from over for Bonds.

As for the Levels in Trade this week, they can be observed on the Weekly Chart in a larger
context.

For Sunday Globex / Monday, here are the levels:

NQ - Range Expands from 12,438 to 12,866 with 12508 as the Pivot.

SPY - Range Expands from 405.44 to 415.22 with 406.17 as the Pivot. The 407.37 Gap is filled.

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*Options have continued to play an important role in Price over the past decade. Presently,
they drive prices significantly.

I will produce a thorough explanation, in detail, in the next few days. It will include:

1. The 5 Greeks and how they function - Delta, Gamma, Theta, Vega & Rho.

2. Alpha and Beta relations from the Underlying to the Derivative.

3. The Yield Correlations.


Have a great weekend, Good Luck on the Open - Trade Safe.