SP500 LDN TRADING UPDATE 20/03/25
WEEKLY & DAILY LEVELS
WEEKLY BULL BEAR ZONE 5650/60
WEEKLY RANGE RES 5830 SUP 5550
DAILY BULL BEAR ZONE 5735/25
DAILY RANGE RES 5795 SUP 5711
2 SIGMA RES 5893 SUP 5613
5640 MARCH CONTRACT GAP
WEEKLY ACTION AREA VIDEO
TODAY'S TRADES & TARGETS
LONG ON TEST/REJECT DAILY BB ZONE TARGET DAILY>WEEKLY>2 SIGMA
SHORT ON TEST REJECT DAILY/WEEKLY RANGE RES TARGET DAILY BB ZONE
LONG ON TEST REJECT OF 5640 TARGET DAILY RANGE SUP
SHORT BELOW 5640 TARGET 2 SIGMA> WEEKLY RANGE SUP
(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
U.S. EQUITIES UPDATE: FOMC
Market Performance Recap:
- S&P 500: +1.08% closing at 5,675, with a MOC sell imbalance of $2.3B.
- Nasdaq 100 (NDX): +1.30% at 19,736.
- Russell 2000 (R2K): +1.51% at 2,080.
- Dow Jones: +0.92% at 41,964.
- Volume: 13.48 billion shares traded across U.S. equity exchanges, below the YTD daily average of 15.5 billion.
Volatility & Commodities:
- VIX: -8.25%, closing at 19.9.
- Crude Oil: +0.45%, ending at $67.20.
- Gold: +0.37%, closing at $3,046.
- U.S. 10-Year Yield: -4 bps at 4.24%.
- DXY (Dollar Index): +0.26% at 103.51.
- Bitcoin: +4.52%, trading at $85,745.
FOMC Meeting Takeaways:
The much-anticipated FOMC meeting concluded with little surprise. The committee maintained a consistent projection of two rate cuts for 2025. Fed Chair Powell’s commentary struck a reassuring tone, stating, "Michigan inflation expectations are an outlier, hard data remains solid, and while recession risks have increased, they are still not high." This sentiment provided the market with a temporary rally catalyst, pushing the S&P 500 above Monday’s highs and bringing the 200-day moving average (5,746) back into focus. The day’s price action, particularly pre-FOMC, felt driven by short squeezes and pension rebalancing flows, even though month-end is still a week away.
Sector & Style Leadership:
- Top Performers: Bitcoin-sensitive stocks, high-beta 12-month winners, non-profitable tech, liquid most-shorted names, and retail-favored baskets all gained over 2%.
- Cyclicals vs. Defensives: The largest single-day percentage rally YTD (+1.68%).
Market Liquidity & Flows:
Despite a post-FOMC activity boost, total market volumes hit YTD lows, with just 13.5 billion shares traded (vs. the YTD average of 15.5 billion). Liquidity in the S&P 500 remains thin, with top-of-book liquidity hovering around $2 million, far below the 1-year average of ~$13 million.
- U.S. Pensions: Modeled to buy $32 billion in equities for quarter-end (92nd percentile for buy/sell estimates over the past three years).
- CTAs: Now a bullish factor, with projected purchases of $8.3 billion on a flat 1-week tape and $22 billion on a flat 1-month tape. Interestingly, CTA flows highlight a significant rotation out of U.S. equities (-$34 billion short) into European equities (+$52 billion long), marking the largest spread on record.
FOMC Decision Details:
- Rates: Target rate unchanged at 4.25%-4.50%.
- Balance Sheet: Monthly Treasury runoff cap reduced from $25 billion to $5 billion, slowing the pace of balance sheet reduction (a positive for equities).
- Economic Projections: The Summary of Economic Projections (SEP) reflected higher core inflation and unemployment forecasts for 2025, alongside lower GDP growth projections for 2025-2027.
Powell’s press conference further reassured markets, emphasizing that while recession fears have risen, they remain "not high."
Trading Floor Insights:
Activity levels on the trading floor were moderate, rated a 5/10.
- LOs (Long-Only Funds): Net sellers (-$2 billion) for the second consecutive day, with concentrated selling in Industrials and Healthcare. LOs were net buyers in Energy and Macro products.
- Hedge Funds (HFs): Flows were balanced, finishing ~$300 million net for sale. HFs sold Financials and Macro Products.
Derivatives Market:
Ahead of the FOMC meeting, the SPX straddle implied a 1% move, slightly elevated compared to the average of ±0.8% for the last four meetings. Post-meeting, the market rallied, volatility collapsed, and the VIX fell below 20 for the first time in two weeks. The straddle for the remainder of the week stands at 1.28%.
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Past performance is not indicative of future results.
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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!