S&P 500: 4400 Resistance Looms as Index Draws Fresh Breath From Hot Retail Sales

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Yesterday was a busy day for stocks, as rates exploded to the upside following the hot report. This led to a sharp decline in the morning for stocks, only for the declines to be erased and the index to turn positive midday. However, those gains were later returned, with the finishing flat.

The big gamma level is at 4,400, which will be significant resistance for the S&P 500 the rest of this week, as well as two big events coming with a auction yesterday at 1 PM ET and then Powell speaking on Thursday at noon.

So there is a pretty good chance we see implied volatility move up into the two events, and with resistance at 4,400 and implied volatility on the rise, it could lead to that drop to lower, erasing the move higher off the lows on October 6.

Wave C equals 78.6% of wave A of larger C, so yesterday’s high at 4,392 works for a potential top.

10-Year Rates Rally Post Retail Sales

The rose sharply yesterday and made a new cycle closing high; it didn’t take long for it to come and test the highs of the past 2-weeks. If it did break out of a bull flag, then I think it is possible for the 10-year to push higher to around 5.25%. The economy and inflation rates support higher yields at this point.

Crude Oil Forms Bull Flag

For now, has been playing nice, but I’m not sure how much longer that will be the case, especially if a bull flag has formed in oil; if so, then oil is probably heading back over $90 on WTI.

WTI-2 Hour Chart

Tesla to Remain Flat Post Earnings?

Today we will get into the heart of earnings season with results from Tesla (NASDAQ:). The market is not expecting a big move. An at-the-money long straddle for expiration on Friday suggests the stock moves about 5.7% the rest of the week.

What is noticeably different going into this quarter’s report versus prior quarters is that implied volatility is much lower, and the IV for puts is trading higher than the calls. That could change yesterday some, but that is not what was seen in July. This may suggest we don’t see a big move in the stock today.

Tesla Price Chart

Netflix: Big Move in the Cards Following Earnings?

The opposite is true for Netflix (NASDAQ:), with implied volatility ramped up and near some of the extremes seen in prior results. However, this time the PUTS carry the higher implied volatility, versus the calls in July. Additionally, an at-the-money long straddle for Friday’s expiration suggests the stock moves about 8.25% the rest of the week.

Netflix Price Chart

There is also a large amount of put gamma, around $350, which could act to support the stock. So, as long as the results aren’t some disaster, it seems possible for the shares to rally if implied volatility falls sharply, causing dealers to unwind put hedges. However, bad results, that push the shares below $350 could lead to a significant decline.

Options Activity

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