Market On Open, Thursday 20 March

Last updated on Mar 20, 2025

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It All Comes Down To Opex

by Alex King, CEO, Cestrian Capital Research, Inc

One of this week’s major catalysts, the FOMC decision and press conference, is now behind us. This was, in my view, a masterclass by Chairman Powell. If you cut through the noise he said:

Trade policy is unclear and so the direction of the economy is unclear
Tariffs tend to be pro-inflation and anti-growth but any such impact is likely to be transitory
We have to hold rates where they are because of the above, but to cut everyone some slack we will ease monetary policy by way of all-but-stopping QT.

This is as close to a sensible critique of the Administration’s economic policy as you will find. What Powell is saying is, if there is a sensible set of tariffs in place and they remain in place at not too punitive a level, then the economy can deal with it after a re-adjustment period. The Fed isn’t taking a religious position on the for-or-against tariffs question, which I think is a sensible line. Tariffs exist all around the world all the time and they don’t in and of themselves kill economic growth nor are they structurally inflationary if set at a sensible and stable level. I continue to believe that the market can absorb the impact of tariffs and still move up, once the presumably-sensible levels are set in place.

The market response to Powell was initially bullish although not wildly so - the highs of Tuesday were not breached on Wednesday. There is some weakness in the pre-market session but nothing ruinous so far. Here’s S&P500 e-mini futures (ES) for instance.

Holding the uptrend from last week’s low.

The bull vs. bear fight though lies above this level, at the 200-day moving average, which all three major equity indices remain below. Dow futures / ETFs put their heads over the 200-day parapet in early trading today but were shot at by bears and have ducked back down for now.

If the market is to regain its confidence then the last major catalyst remaining this quarter is options expiry tomorrow. There is what is professionally known as a Yuge Amount Of Options expiring and my guess would be that the preponderance of them will be puts, so spooked have been investors of late. As per Q1 2020 and Q1 2009 and indeed Q4 2018 that sets the scene for a possible rebound caused by dealer re-hedging flows. (If this is all Greeks to you then I suggest you check out the good folks at SpotGamma who taught me this stuff).

So let’s check in to see where we stand. Here’s the latest from SpotGamma by the way.

So - direction from here is unclear I would say. My guess is we see at least a relief rally but I am far from certain there is enough oomph to get up and over the 200-days.

Before we get into the weeds here, a word from the machines:

Get A Robot Buddy

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Please note that our RIA service pricing will rise from $2k/yr right now to $3k/yr on 31 March - as always our price rises apply only to new members. So if you have been thinking of signing up, now’s a great time. You can reach me personally at alex.king@cestriancapital.com if you’d like to discuss the RIA service.

And with that - let’s get to work.

Short- And Medium-Term Market Analysis

If you want this daily dose of pattern recognition, and you aren’t yet a subscriber of course, you can read about and choose from all the subscription services that include this note, here.

US 10-Year Yield

Equity Volatility

Still no true vol crush. This means as yet no outright bullishness at this stage in equities.

Disclosure: No position in volatility-linked securities.