MARKET WRAP

Carve outs of the three day old tariffs weren’t enough to put any confidence back into the market as traders await tomorrow morning’s jobs number. The SPX closed more or less at its 200 day moving average after threatening to spill below earlier in the day. For the day the SPX was -1.8%, QQQ had a rough one, -2.8% while IWM was lower by -1.6% Treasury yields steadied for at least one day, as did Oil. The dollar / DXY was volatile once again but managed to close unched. After the bell COST is down slightly, while AVGO is up sharply, but still early on both. Consensus expectations for tomorrow morning’s number is 160k/4.0%. Expected moves and an important option strike to watch at the bottom of the email.

On today’s MRKT Call, a run down of all the volatility, from equities, the dollar, yields and even Bitcoin. And on RiskReversal Pod Danny Moses is back to chat his interview with Michael Lewis, the CoreWeave IPO as market psychology. Enjoy!

MRKT MATRIX: March 6, 2025

Today’s Top Stories:

• Dow drops 500 points, S&P 500 hits lowest since early November on trade policy fatigue (CNBC)

• Wall Street Goes From Hope to Panic as Nasdaq 100 Nears a Correction (Bloomberg)

• The Recession Trade Is Back on Wall Street (WSJ)

• Wall Street Banks Say Markets Are Flashing Rising Recession Risk (Bloomberg)

• Tariff Whiplash Spooks U.S. Consumers (WSJ)

• Tom Lee is a buyer of stocks and says a lot of bad news is already priced in (CNBC)

• MongoDB plummets 26% as weak outlook overshadows strong quarterly results (CNBC)

• Marvell plunges 19% as outlook falls short of high expectations (CNBC)

• Worst German Bond Rout Since 1990 Sparks Global Debt Selloff (Bloomberg)

• Canada’s Anti-Musk Pivot Hits Starlink’s Second-Biggest Market (Bloomberg)

Today’s MRKT Call is Presented by CME Group

Trump Tariff Volatility: How To Navigate The Stock Market

The show kicks off with a deep dive into intraday volatility across equities, highlighting that similar turbulence is unfolding in other asset classes, including treasury yields, oil, and the dollar. This leads into a discussion on the dramatic swings in treasury yields and their broader market implications. Next, the focus shifts to the S&P e-mini chart, which is once again testing its 200-day moving average, a key technical level for traders. Guy highlights the rising concerns around loan delinquencies, specifically in housing, auto loans, and credit card debt, and how these financial pressures could impact consumer spending. The discussion then moves to the Nasdaq e-mini and the potential downside risk if the current selling pressure continues. A closer look at SOXX reveals its prolonged underperformance since last summer, with the index officially breaking its uptrend. The conversation then turns to today's market casualty, MRVL, and what its struggles might signal ahead of AVGO’s earnings. This leads into a broader discussion on CoreWeave’s upcoming IPO and its connection to MSFT. From there, the focus shifts to the weakening dollar, analyzing the unusual move in the DXY chart. Bitcoin comes into play next, with a discussion on its inability to rally even on positive news and where a potential buy level might emerge. The show wraps up with a look at COST ahead of its earnings report, assessing what to watch for in the numbers and how the stock might react.

Click here to access all of the charts mentioned in today’s MRKT Call.

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Today’s RiskReversal Podcast is Presented by Betterment and RBC

The Return of Danny Moses, Market Volatility & Dot Com Bubble Parallels

Guy Adami and Dan Nathan welcome back Danny Moses from the On The Tape podcast to discuss his return and the restructuring of RiskReversal Media. The conversation covers a variety of topics, including the importance of actionable market analysis and longer-form discussions on prevailing themes. Danny shares insights from his recent interview with famed author Michael Lewis on civil services and the economic implications of AI technology, using the example of Nvidia and Microsoft. The trio also dive into current market conditions, volatility, tariffs, federal jobs, and the implications of credit spreads on the economy. A highlight is the analysis of the upcoming Core Weave IPO and its impact on the AI and data center markets. The episode concludes with an in-depth look at the psychology of market cycles and the potential for ongoing volatility in equity, fixed income, and crypto markets.

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What’s Next?

The S&P 500 (SPX) closed the day at 5738, essentially at its 200-day moving average, into tomorrow’s NFP jobs number (before the open). This was an area we’ve been highlighting over the past week as one last line of defense both technically as well as via the options market (there is some help from options in this very specific area, albeit not much help). The jobs number likely determines whether we bounce here or see some chaos to the downside. While breaking below the 200 day is already a concerning development for equities, something interesting lies just a few percentage points below—at 5565—where a significant options positioning dynamic could trigger a wave of forced selling (and potentially a large snap back if sellers exhaust.) That level coincides with a major strike in the options market, specifically the the long leg of a put spread / collar executed by a large hedged S&P 500 fund, expiring March 31st. Market makers who are short these puts will need to increase their hedge if the SPX approaches this strike, potentially leading to a self-reinforcing spiral of selling pressure.

This setup presents a gamma trap, where the dealers' hedging activity exacerbates market moves. As SPX moves lower toward 5565, those short the put will increasingly need to sell stock to remain delta neutral, further pressuring prices lower. The danger here is that the closer we get to this strike, the more aggressive the hedging becomes, potentially leading to a sharp capitulation event where liquidity dries up and price moves accelerate. If this scenario plays out, it could resemble previous instances of liquidity-driven selloffs, where market structure plays a more significant role in short-term price action than it should.

However, this same dynamic could set the stage for a violent reversal. Once the necessary hedging has been completed and if buyers step in, the forced selling pressure could quickly reverse, triggering a sharp rally back above that strike. As the market moves higher, those same market makers who were selling stock to hedge their short puts would now have to buy stock back to unwind their hedges, creating a snapback effect. This kind of reversal, has the potential to produce a dramatic, V-shaped intraday recovery should we see selling pressure below that strike. (picture one of those days where the market is down 2% but then finishes up 2% ). Whether this happens, and whether that level ultimately serves as a major inflection point will depend on a lot more than just market structure. But it is an important level to keep an eye on should the Jobs Number send stocks lower. 

You can see the strike by looking at the March 31st expiry 5565 puts. You’ll see about 40k in open interest. The JHEQX Fund is long those puts, market makers are short.

That’s the scenario from the options market should we go down another 2% or so from here. And at this stage is simply theoretical, but we’re close enough to make it worthy to point out. It is also, should it happen, very near to a 10% move from the SPX highs, so there is some added significance there. HOWEVER, If that does not happen and the jobs number provides some relief back above the 200 day moving average that level remains the most important area for potential index support, as it has the past few trading days.

As for tomorrow’s number, here are the expected moves and implied range:

• SPX 1.5% / $5,650-$5,825

• SPY 1.5% / $564-$581.50

• QQQ 1.9% / $479-$497.25

• IWM 2.2% / $200.50-$210

• TLT 1% / $89.50-$91.50
  

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