SP500 LDN TRADING UPDATE 22/1/26
SP500 LDN TRADING UPDATE 22/1/26
WEEKLY & DAILY LEVELS
***QUOTING ES1! FOR CASH US500 EQUIVALENT LEVELS, SUBTRACT POINT DIFFERENCE***
WEEKLY BULL BEAR ZONE 6900/6890
WEEKLY RANGE RES 7047 SUP 6903
FEB OPEX STRADDLE 6726/7154
MAR QOPEX STRADDLE 6466/7203
DEC 2026 OPEX STRADDLE 5889/7779
The area around the SPX aggregate gamma flip is at 6940. While the upside gamma is pronounced, it has somewhat smoothed since last week's vertical surface. The index has more leeway to rise. Based on the most recent analysis (Friday AH), the steep surface develops around 7030.
WEEKLY VWAP BULLISH 6969
MONTHLY VWAP BULLISH 6850
WEEKLY STRUCTURE – ONE TIME FRAMING DOWN - TBC
MONTHLY STRUCTURE – ONE TIME FRAMING HIGHER - 6775
DAILY VWAP BEARISH 6907
DAILY STRUCTURE – BALANCE - 6945/6822
DAILY BULL BEAR ZONE 6877/87
DAILY RANGE RES 6977 SUP 6854
2 SIGMA RES 7031 SUP 6801
VIX BULL BEAR ZONE 20
PUT/CALL RATIO 1.44
TRADES & TARGETS
LONG ON REJECT/RECLAIM DAILY BEAR ZONE TARGET DAILY RANGE RES & GAP FILL 6977
LONG ON ACCEPTANCE ABOVE 6945 TARGET DAILY RANGE RES & GAP FILL 6977
SHORT ON REJECT/RECLAIM DAILY RANGE RES TARGET 6945
(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 ABOVE OR BELOW THESE LEVELS)
GOLDMAN SACHS TRADING DESK VIEW - “RISK OFF”
S&P closed up +116bps at 6,876 with a Market On Close (MOC) sell imbalance of $2.2bn. The Nasdaq 100 (NDX) rose +136bps to 25,327, the Russell 2000 (R2K) surged +200bps to 2,698, and the Dow gained +121bps to close at 49,077. A total of 20.77 billion shares traded across U.S. equity exchanges, exceeding the year-to-date daily average of 18.36 billion shares. The VIX dropped -15.88% to 16.90, WTI Crude rose +50bps to $60.66, the U.S. 10-Year Treasury yield fell -5bps to 4.25%, gold climbed +152bps to $4,836, the U.S. Dollar Index (DXY) increased +15bps to 98.79, and Bitcoin advanced +75bps to $90,019.
Activity levels on the trading floor were rated a 7 out of 10. Stocks closed with gains exceeding 1% across the board, led by the Russell 2000 (RTY > NDX > SPX). Key drivers included news of a potential future Greenland deal between Trump and NATO. Trading desks saw elevated activity, with notable rotations as investors moved funds from tech to cyclicals. Long-duration investors drove much of the action, while hedge funds adjusted more cautiously following adverse moves in Momentum (-2.7%) and Beta (+1.5%). ETFs accounted for 36% of total trading volume, and liquidity remained weak, with the S&P 500’s top-of-book average at $5.72mm.
Notable headlines included: *SanDisk shares surged 11%, bringing its 2026 gains to over 111%.* Apple announced plans to revamp Siri into its first chatbot in the second half of 2026.
The Russell 2000 (R2K) has outperformed the S&P 500 for all 13 trading sessions in 2026 so far. Our macro outlook remains favorable for small-cap performance in early 2026, driven by Goldman Sachs’ forecast of above-consensus U.S. economic growth, below-consensus inflation, and continued Fed easing. Markets appear to underprice the potential strength of the U.S. economy next year. Historically, small-caps outperform during cyclical rallies. Futures positioning and short interest also indicate upside potential for small-caps.
However, we do not anticipate significant outperformance of the Russell 2000 over the S&P 500 for the full year. Current valuations are above average, and our economists’ 2026 U.S. real GDP growth forecast of 2.6% aligns with a 12-month return of approximately 10% for the small-cap index. While respectable, this is comparable to our 12% return forecast for the S&P 500. Additionally, small-caps tend to exhibit higher volatility. Although Russell 2000 earnings growth is expected to be strong, consensus estimates of 61% EPS growth for 2026 appear overly optimistic.
On the derivatives side, it was a busy day for the volatility desk. The VIX expiry this morning settled at 18.82, down from over 20 earlier in the day, helping push the S&P back into positive territory. Positioning remains stretched as dealers shed gamma, with sentiment reading exceedingly bullish. The Panic Index jumped from ~5.4 to 8.9 in one session, signaling potential for outsized moves on headline-driven shocks. Despite this, immediate flows continue to support U.S. equities. The desk observed significant buying of short-dated upside in the S&P and some forward volatility buyers selling gamma. The straddle for tomorrow closed around ~60bps.
Goldman Sachs Flow of Funds analysis indicates stretched positioning and extremely bullish sentiment. The flow dynamic is highly constructive, highlighted by a massive equity-to-money market flow of $133bn for the week ending January 14, marking the third-largest in the dataset.
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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!