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SP500 LDN TRADING UPDATE 27/10/25
***QUOTING ES1 CONTRACT FOR CASH US500 EQUIVALENT LEVELS SUBTRACT POINTS DIFFERENCE***
***WEEKLY ACTION AREA VIDEO TO FOLLOW AHEAD OF NY OPEN***
WEEKLY BULL BEAR ZONE 6830/40
WEEKLY RANGE RES 6924 SUP 6730
OCT EOM STRADDLE 6542/6951
NOV MOPEX 6951/6339
DEC QOPEX 6243/7085
As of Friday's market open, the SPX aggregate gamma flip zone is around 6675, with the gamma peak sitting near 6900. Over the past two weeks, we've transitioned from negative to positive aggregate gamma. Why is this significant? It’s all about the dealers—positive gamma tends to slow down price movements, while negative gamma can amplify them. The pace of change in gamma begins to taper off as we approach the 6850 level, signaling a potential shift in momentum.
DAILY VWAP BULLISH 6773
WEEKLY VWAP BULLISH 6712
DAILY STRUCTURE – ONE TIME FRAMING HIGHER - 6812
WEEKLY STRUCTURE – ONE TIME FRAMING HIGHER - 6690
MONTHLY STRUCTURE – ONE TIME FRAMING HIGHER - 6371
Balance: This refers to a market condition where prices move within a defined range, reflecting uncertainty as participants await further market-generated information. Our approach to balance includes favoring fade trades at the range extremes (highs/lows) while preparing for potential breakout scenarios if the balance shifts.
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.
One-Time Framing Down (OTFD): This describes a market trend where each successive bar forms a lower high, indicating a pronounced and steady downward movement.
GOLDMAN SACHS TRADING DESK VIEWS
Despite the disruptions in market momentum and reversals in well-held segments, the S&P ended the week up 2% at a new all-time high supported by a soft CPI, generally positive earnings, and easing tensions between the US and China. Themes such as High Yield Debt Sensitive, Data Centers, and Defense outperformed, while Quantum Computing, Rare Earths, and Nuclear lagged.
- Prime: Following two consecutive weeks of selling, hedge funds shifted their strategy to net buying US equities this week, largely due to short covering in macro products and some long purchases in single stocks. Most ETF shorts raised from last week (up 6.1%) were covered this week (down 5.9%). Materials stocks were bought on every trading day this week, marking the biggest net buying in over eight months, driven mostly by long buys. Conversely, Consumer Staples was the most net sold sector in both percentage and standard deviation terms due to both long and short sales.
- Shares: Desk flows were stable, with factor fluctuations and trading of macro products (ETFs, baskets, etc.) leading the activity. The single stock trading we noticed was primarily around earnings, with long-only investors finishing as $1.5 billion net sellers while hedge funds were net buyers at $2.5 billion for the week. The largest sell skews were observed in Tech, Financials, and Discretionary sectors, while the largest buy skew was in macro products without significant sector net buying. A busy week is ahead with a considerable amount of micro earnings (43% of S&P market cap reporting, focusing on Mag 7: MSFT, GOOGL, META on Wednesday & AAPL, AMZN on Thursday) alongside central bank decisions (FOMC + BOC on Wednesday, ECB + BOJ on Thursday).
- Futures: With the equity market maintaining its upward momentum and achieving new SPX highs on Friday, trend signals remain positive across various global markets and time horizons. The average short-term trend area sits approximately 3% below spot (and 6620 in SPX), with the medium-term closer to 7%. Systematic macro positioning is around an 8 out of 10 overall, with CTA/trend following strategies showing relatively higher positions compared to risk-parity styles. We expect modest neutral flows and minimal sales in the baseline scenario.
- Derivatives: Compared to the SPX, single stock and quantitative factors are trading at the highest volatility levels seen in over five years. In a bid to take advantage of this volatility spread, investors have shifted from broad index strategies to more targeted ETF or custom basket derivatives. Three additional observations: 1) The VIX returned to 16 during Friday’s session, which encourages demand for hedges as it is no longer viewed as “too high” to own. 2) This market is positioned to trade spot up and volatility up if we can surpass another 100 basis points from here, with localized long gamma strikes slightly above. 3) The seasonality trade is well recognized but not widely embraced, setting the stage for a potential chase.
- Baskets: The Power Up America Index (GSX1POW1) compared to the market excluding the Mag7 (X7) saw a retraction of approximately 7.5% over five trading days after reaching all-time highs on October 15. This was linked to concerns raised by GSI Technology’s announcement regarding processing unit chips that match GPU-level performance for large-scale AI applications at significantly lower energy costs. Our factor analysis indicates that a broader momentum unwind triggered the sell-off in top performing themes year-to-date. A summary of the AI power call with GS Research is included.
- Sector Specialists: The chatter surrounding Financials quieted this past week, especially in regional banks, with two previously impacted names, WAL and ZION, both increasing by at least 10% as they reported earnings without major incremental credit concerns. Insurance experienced a tactical recovery, although there was divergence among single stocks based on unique differences at earnings (CB benefitted from indicating a higher buyback, while SIGI struggled due to further reserve strengthening). Next week, the focus in insurance will return to the pace of deceleration in broker organic growth, starting with several earnings on Monday from BRO. Regarding payments, comments from remittance providers operating in the Latin American corridor (like WU) indicated stabilizing trends, sparking a relief rally among remittance providers, while next week the focus will shift to card networks with earnings from V and MA. In Real Estate, CBRE experienced robust trends in real estate leasing and transaction activities, boosting leasing-oriented peers such as CWK, NMRK, and JLL, who have yet to report earnings.
Trading Flows (October 17 – October 23):
After two weeks of net selling, hedge funds shifted strategies and net purchased US equities this week, showing an increase of 0.9 standard deviations over one year, largely due to short covering with a much smaller contribution from long buys (3 to 1 ratio).
Macro Products, combining Index and ETF, accounted for nearly 80% of total net purchases (+1.0 standard deviations over one year, the largest in four months), completely driven by short covers. US-listed ETF shorts witnessed net covering of 5.9%, representing the largest decline in five months, primarily led by covering in Financials, Large Cap Equity, Small Cap Equity, China, and Energy ETFs.
Single Stocks experienced modest net buying (+0.4 standard deviations over one year), with long purchases overshadowing short sales (4 to 1 ratio). Consumer Discretionary, Materials, Health Care, and Energy emerged as the most notably net purchased sectors, while Information Technology, Staples, and Utilities were the most sold.
Hedge funds consistently net bought US Materials stocks every day this week at the quickest pace in over eight months (+2.2 standard deviations over one year), mainly due to long buys as short flows remained subdued. Metals & Mining and Chemicals were the top net bought subsectors this week. Although US Materials have been net bought for five consecutive weeks, the positioning in this sector remains relatively light, with Sector Gross/Net exposures (as a percentage of the total US Prime book) currently at 3.0%/2.6%, sitting at the 38th/21st percentiles compared to the past year and 10th/6th percentiles over the last five years.
Conversely, Consumer Staples stood out as the most net sold US sector this week in both percentage and standard deviation terms, influenced by a combination of long and short sales (3 to 1). Almost all subsectors (except Food Products) were net sold, with Tobacco, Staples Distribution & Retail, and Household Products leading in selling. It is noteworthy that 1) US Staples had been net bought for five consecutive weeks and in seven of the previous eight weeks leading into this week, and 2) this week’s notional net selling across the sector was the highest in over six months (-1.9 standard deviations over one year). The long/short ratio for US Staples is currently at 1.32, positioned in the 92nd percentile compared to the past year and the 91st percentile against the last five years.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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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!