SP500 LDN TRADING UPDATE 5/9/25
WEEKLY & DAILY LEVELS
***QUOTING ES1! CASH US500 EQUIVALENT LEVELS SUBTRACT ~10 POINTS***
WEEKLY BULL BEAR ZONE 6420/10
WEEKLY RANGE RES 6554 SUP 6392
DAILY BULL BEAR ZONE 6510/00
DAILY RANGE RES 6572 SUP 6452
2 SIGMA RES 6633 SUP 6392
VIX DAILY BULL BEAR ZONE 17
SEP MOPEX STRADDLE 186.6 POINTS - 6260/6639
SEP EOM STRADDLE 178 POINTS - 6282/6638
DAILY MARKET CONDITION - ONE TIME FRAMING UP 6456
One-Time Framing Up (OTFU): This represents a market trend where each successive bar forms a higher low, signaling a strong and consistent upward movement.
TRADES & TARGETS
LONG ON TEST/REJECT DAILY BULL BEAR ZONE TARGET DAILY RANGE RES
SHORT ON TEST/REJECT OF WEEKLY RANGE RES TARGET DAILY BULL BEAR ZONE
(I FADE TESTS OF 2 SIGMA LEVELS ESPECIALLY INTO THE FINAL HOUR OF THE NY CASH SESSION AS 90% OF THE TIME WHEN TESTED THE MARKET WILL CLOSE AT OR BELOW THESE LEVELS)
GOLDMAN SACHS TRADING DESK VIEWS
S&P closed up +83bps at 6,502, supported by a Market-on-Close (MOC) buy imbalance of $3.3bn. The NDX gained +93bps to finish at 23,633, the R2K climbed +109bps to 2,375, and the Dow rose +77bps to 45,621. Trading volume reached 14.5bn shares across all U.S. equity exchanges, slightly below the year-to-date daily average of 16.8bn shares. The VIX dropped -599bps to 15.38, crude oil slid -103bps to $63.32, the U.S. 10-year Treasury yield declined -5bps to 4.16%, gold dipped -26bps to 3,550, the DXY strengthened +14bps to 98.28, and Bitcoin fell -188bps to $110k.
Post-Labor Day trading activity continues to pick up across desks, driven by a busy sell-side conference schedule. The GS Retail Conference concluded today, while the GS Communacopia kicks off next week alongside other key events, including Barclays Staples, Citi TMT, Wells Fargo Healthcare, MS Industrials, and UBS Materials conferences. Feedback from day two indicates constructive sentiment, with retail flows skewed toward buying in the afternoon, while Staples saw more selling as challenges persist in that sector.
Yields remain a focal point after earlier volatility, with the 10-year yield settling below 4.20% by the close. Momentum was positive, with the HF VIP vs. Most Short (GSPRHVMS Index) ending +145bps. In tech, notable earnings reports included AVGO, BRZE, DOCU, GWRE, IOT, PATH, and TTAN, with AVGO in the spotlight. AVGO reported "okay" AI revenues for the quarter at $5.2bn, slightly above its $5.1bn guidance (and up from $4.4bn last quarter). The company guided for AI semiconductor revenue growth to accelerate to $6.2bn in Q4. AVGO traded flat post-earnings. Meanwhile, DOCU gained +6.5% (off earlier highs of +10%) following a beat-and-raise quarter. Broader software names like ADBE, NOW, MNDY, HUBS, and SNOW continue to de-rate, with little new information from last night’s reports, leaving bearish SaaS narratives intact.
Flows: Overall activity was rated a 5 out of 10 today. Our trading floor ended +397bps better to buy, with demand from both long-only (LO) investors and hedge funds (HFs). HF flows were skewed 5% toward buying, driven by interest in consumer discretionary, macro products, and financials. LO flows were even more bullish, with a +14% buy skew, led by demand in macro products, communication services, and information technology.
GS Research on Nonfarm Payrolls (NFP):
- We estimate that nonfarm payrolls increased by 60k in August, below the consensus estimate of 75k.
- The unemployment rate likely edged up to 4.3% (rounded) from 4.248% in July, reflecting easing labor market slack and potential payback from the reversal of July’s spike in new entrant employment.
- Average hourly earnings are estimated to have risen by 0.3% month-over-month (seasonally adjusted), supported by slightly positive calendar effects.
The VIX has returned to a 15 handle as SPX futures once again surpassed 6500. The skew has notably flattened across the surface during this breakout. We are observing continued hedging activity through SPY/IWM downside positions. Interest in the financial sector is increasing, as seen by two-way flows in XLF; for instance, yesterday there was a buyer of XLF put spreads, and today we noted an upside buyer of XLF calls with a short expiration.
The straddle for tomorrow's NFP release was priced at about 0.60%, and we perceive the potential outcomes for volatility as quite bimodal. A rally back to previous highs should result in implied volatility declining again, as we would re-enter a period of dealer gamma, while a selloff might trigger responsive volatility if we test the lows from earlier this week.
For those who are apprehensive about the forthcoming weeks or months, the desk suggests considering HYG puts or put spreads as an economical hedge. HYG options are still exhibiting historically low implied volatilities, with the 3-month 25-delta put implied vol at the 13th and 9th percentiles for the last 5 and 10 years, respectively.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!