The Market Brief
U.S. futures extended their gains higher in early trading Wednesday, buoyed by hopes of a Middle East peace breakthrough and continued strength in corporate earnings.
Impact Snapshot
🟥 ISM Services PMI - 10:00am
Macro Viewpoint
US stocks extended a four-day rally as the latest batch of corporate earnings pointed to a strong economic backdrop and continued demand for artificial intelligence build-out, while hopes rose for a US-Iran deal that would re-open the Strait of Hormuz.
Still, the recent correction in tech stocks has brought valuations to more reasonable levels, helping to restore investor confidence after a bout of volatility triggered losses at several hedge funds last month.
Prime Intelligence
Investors just tipped their hand: the rush to rebuild upside exposure is on.
SPX call option volume eclipsed 4 million contracts yesterday, easily the highest level recorded in the past year. At the same time, SPX put/call skew posted its largest two-day decline in almost a decade. Both stats point to an extraordinary surge in demand for bullish index exposure.
Alongside receding volatility in oil and rates, that backdrop is forcing clients to rebuild exposure after spending the last several weeks cutting gross and net.
The result has been a significant disconnect between what options were pricing and what the market delivered. Yesterday’s SPX implied move was roughly +/-40bps versus a realized gain of 179bps, more than 4x the priced move, entirely to the upside. We flagged the potential of upside continuation early for our subscribers as well.
The Market Brief
In todays brief we break down the positioning shift now driving price action, from dealer gamma exposure to how systematic funds are leaning. We lay out why the setup favors continuation, and what level is now in play.
Join hundreds of subscribers already on the inside 👇
