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Our View

Core inflation in February hit 2.8%, higher than expected, and the Trump headlines helped blow up the ES and NQ. The gap-downs produced little to no bounce, and I knew it right away:

IMPRO : Dboy : (9:33:30 AM): knife catchers beware…

The ES made a high of 5741.75 but closed at new lows on the 4:00 cash close, down to 5602.25 — a drop of 136.75 points or 2.38%. Ten out of the eleven S&P sectors closed lower. The NQ also closed on its lows, trading from 19,361.00 down to 19,357.50. The tech-heavy Nasdaq fell 2.7%, with the Magnificent Seven group of stocks erasing about $505 billion in market value. The YM closed down 625.25 points or 3.15%. It ended at 41,717.00, a drop of 888 points or 2.08% — its largest percentage drop since March 10th. The RTY closed at 2028.00, down 52.40 points, or 2.52%.

Both the S&P 500 and Nasdaq are both on track to log their worst quarterly performances since 2022. Meanwhile, gold made a new contract high, bond prices climbed, and one of Putin’s limousines exploded.

In order to be a good trader, you have to follow your plan. I’ve expressed my concerns for weeks — the markets are shifting. The S&P is losing ground to global markets, and it’s evident in the MSCI ex-US vs. MSCI USA chart. The spread is widening, and not in favor of the ES. It’s the same story with every economic number: they all show the same thing — inflation is rising.

Is Trump behind part of the uncertainty? We all know he is, but that’s his style. He wants a U.S. recession to lower interest rates. And Wednesday, April 2nd, is D-day for Trump’s tariffs.

JPM Collar Watch

The JP Morgan Collar trade refers to a hedge fund (named: JHEQX) which hedges a long equity portfolio using a large options collar trade. Each quarter, this hedge fund rolls into a new options collar, and the resulting hedging flows can adversely affect the market.

To enter the collar, the fund sells a 3–5% out-of-the-money call and uses those proceeds to buy a 3–5% out-of-the-money put spread. At the end of each quarter, they let the existing collar expire and enter a new one to cover their stock exposure for the next quarter.

And guess what — the JP Morgan collar could blow it up today.

The collar is setting up deep negative gamma exposure on the $SPX today. To fully hedge JHEQX’s $23 billion portfolio with ESM25 futures — if the S&P 500 falls below 5565 — and ignoring the put spread’s partial coverage, it would take approximately 82,638 contracts. Accounting for the put spread (5565–4700), that number drops to around 69,820 contracts.

In practice, the actual number could be lower (e.g., 10,000–20,000), depending on how much additional hedging is needed beyond the options structure. But the theoretical maximum aligns with those figures.

On the flip side, to fully hedge JHEQX’s $23 billion portfolio as the S&P 500 rallies above 4700, it would require selling approximately 58,000 ESM25 contracts — adjusting dynamically based on the portfolio’s net delta and the index’s movement.

I don’t know how this is going to go, but from 3:25 to the cash close, we should see a big jump in volume and volatility.

The ES opened Sunday night’s Globex session at 5590 and sold off down to 5552, down another 0.6%.

Danny sent a chart for here but I can’t get it to load.

We have one economic report at 8:45 — the Chicago Business Barometer — plus the end-of-quarter rebalance, the JPM collar, and the Trump tariff headlines ahead. A lot of times after a big down move, you get a bounce on Globex, but it’s 8:45 p.m. and the ES is down 0.46% and the NQ is down 0.85%, 48 points off the 19,600.00 high. It’s too late to say it could get ugly.

Warren Buffett said, “You’ve got to be prepared, when you buy a stock, to have it go down 50% or more and be comfortable with it, as long as you’re comfortable with the holding.”

And Peter Lynch, a legendary former mutual fund manager, said, “The key organ in your body in the stock market is the stomach, not the brain.”

Our lean: I don’t think any investor would be comfortable holding stocks that are down 50% or more. Their combined market capitalization would be approximately $7.51 trillion. I don’t think that is going to happen, but the markets do look lower, and finding any good news is getting harder and harder.

Friday’s rotation was out of stocks and into bonds. I think we could see more of the same in that department.

As for the JPM Collar, there’s going to be a lot of auto-hedging — up and down — but it should be a sell later in the day. I think you sell any 30 to 50-point pops. I don’t doubt we’ll see a few. These markets have a very weak tone to them.

MiM and Daily Recap

Monday’s ES session opened the regular trade at 5723.50 and wasted little time in making its session high of 5731.25 at 9:36 AM. From there, a swift wave of selling pressure emerged, marking an intraday low at 5644.50 by 11:00 AM — a drop of nearly 90.25 points (-1.57%) from the morning’s high.

A modest bounce took ES to 5665.00 at 11:36 AM, but this lower high was met with further selling. The midday session saw a brief consolidation zone between 12:00 and 2:00 PM, with prices cycling through a pullback low of 5633.00 at 12:44 PM, a lower high at 5642.75 at 12:51 PM, and another bounce to 5636.75 at 2:14 PM before fading once again.

Momentum remained tilted to the downside. A key low print of the ES at 5613.75 at 1:33 PM, briefly lifting to 5634.25 at 3:06 PM, but subsequent highs failed to break the trend. Late-day action chopped within a tight range, printing successive lower highs at 5636.50 (2:16 PM), 5634 (3:06 PM), and 5631.00 (3:54 PM). The final leg down accelerated into the bell, tagging a session low of 5617.25 just before the 4:00 PM close.

The regular session closed at 5624.50, down 99.00 points or -1.73% from the open. From the prior day’s cash close, the change was -116.00 points (-2.02%). Notably, the Globex session was relatively stable in comparison, dropping just 18.00 points (-0.31%). Cleanup hours added to the decline with a further drop of 22.25 points (-0.40%), with ES settling the full session at 5602.50, a net change of -139.25 points (-2.43%).

Monday’s trade was decisively bearish, marked by a consistent pattern of lower highs and lower lows throughout the regular session. Despite intermittent bounces, buyers failed to regain meaningful control, and volume confirmed the intensity of the move with 1.51 million contracts traded during regular hours and 1.82 million across the full session.

The Market-on-Close (MOC) imbalance data added a layer of interest. At 3:51 PM, the imbalance reached $2.933B with 67.3% of symbols skewed to the buy side — a strong imbalance exceeding the 66% threshold. While this might typically support prices into the close, the magnitude of the day’s selling appeared too strong for any meaningful lift into the final minutes. The imbalance helped stabilize the decline briefly, but the closing print still landed near session lows.

Overall, the market signaled risk-off sentiment with persistent intraday weakness, failing bounces, and heavy volume confirming the move. The strong MOC buy imbalance suggests some passive accumulation, but given the downward momentum, sellers remained firmly in control into the close.

How to read the MIM

Technical Edge

Fair Values for March 31, 2025:

Daily Breadth Data 📊

Weekly Breadth Data 📈

Room Summaries:

Polaris Trading Group Summary Friday, March 28, 2025

Friday’s session in the PTG room, led by PTGDavid, delivered a strong close to the trading week. The day featured a high-conviction short bias, clean execution of downside targets, and valuable insights on strategy and indicator use.

Pre-Market Prep & Early Moves

Opening Action – Short Bias Pays Off

Mid-Morning – Liquidation Move Nails Downside Targets

Post-Selloff – Equilibrium & Reversal Opportunities

Crude Oil Futures – Another Textbook Sequence

End of Day & Market Context

Key Lessons & Highlights

Summary

Friday was a strong finish to the week. David and the room executed a clean short-biased session, with all downside targets fulfilled and strong trade management throughout. The room stayed focused, educational, and profitable—a textbook example of disciplined trading using the PTG framework.

DTG Room Preview – Monday, March 31, 2025

Calendars

Economic

Important events for the rest of the week:

S&P 500 Earnings

Recent

Full MTS Calendars

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Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!