SP500 LDN TRADING UPDATE 15/12/25
***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 6810/00
WEEKLY RANGE RES 6940 SUP 6725
DEC EOM STRADDLE 6631/7067
DEC QOPEX STRADDLE 6303/7025
The week opens in a negative gamma regime with zero gamma ES ~6820). Below this, price is more sensitive and prone to sharper moves.
DAILY VWAP BEARISH 6866
WEEKLY VWAP BULLISH 6766
MONTHLY VWAP BULLISH 6764
DAILY STRUCTURE – BALANCE - 6805/6909
WEEKLY STRUCTURE – BALANCE - 6805/6909
MONTHLY STRUCTURE – BALANCE - 6952/6539
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 favouring 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, signalling 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
S&P closed down -107bps at 6,827 with a Market On Close (MOC) of $3 billion to buy. NDX dropped -191bps to 25,196, R2K declined -146bps to 2,552, and the Dow fell -50bps to 48,458. Trading volume reached 18 billion shares across all U.S. equity exchanges, exceeding the year-to-date daily average of 17.44 billion shares. VIX rose +6.5% to 15.81, WTI Crude dipped -21bps to $57.48, U.S. 10YR Treasury yield increased +3bps to 4.19%, gold gained +44bps to 4,332, DXY edged up +6bps to 98.40, and Bitcoin dropped -278bps to $90,300.
Momentum stocks saw significant declines, led by AVGO (-12%) and ORCL (-4.5%). Macro-driven flows dominated, with ETFs representing 36% of the tape compared to the year-to-date average of 28%. AI-related disappointment weighed on sentiment, as Bartlett highlighted several factors: ORCL's increased FY26 Capex spending failed to impress the market, AVGO's AI revenue forecast was insufficiently raised, OpenAI’s ChatGPT 5.2 release lacked the excitement of Gemini 3’s launch in November, and reports of ORCL datacenter delays (later refuted) further dampened enthusiasm. After a strong two-week rally, AI stocks have largely returned to flat over the past two months.
Sector rotation showed a clear cyclical and AI unwind, evident in XLV versus XLK performance. The GSPUCYDE pair trade basket has risen in 14 of the last 15 sessions, pulling consumer discretionary and retail stocks along with it. LULU surged +11% on better-than-expected FY26 guidance and optimism around CEO transition plans, while RH gained +8% as investors positioned for a housing recovery. COST remained flat, delivering solid results in line with expectations.
Activity levels on the floor were moderate, rated a 4 out of 10. The floor ended -439bps for sale versus a 30-day average of -136bps. Long-Only investors closed as net sellers of -$900m, driven by broad supply across sectors. Hedge Funds finished as net sellers of -$1b, primarily in industrials and tech. Both groups recorded ~$1b net selling for the week. Next week’s focus includes Tuesday’s Non-Farm Payroll report (consensus at +52k) and several central bank decisions: BOE (91% probability of a 25bps cut), ECB (expected to hold), BOJ (anticipated 25bps hike), Norges Bank, and Riksbank.
In derivatives, the key theme was the underperformance of volatility despite the S&P straddle realizing over 2x. Morning activity centered on VIX gamma and vol-of-vol flows, tapering off later in the day. Persistent skew bids were noted, but clients shifted to fade volatility in the afternoon. With VIX expiry approaching next week, the desk expects further vol selling. Monday’s straddle closed at 60bps.
On the prime brokerage side, U.S. Fundamental Long/Short Gross leverage declined -1.1 points to 217.7% (91st percentile for the year), while Net leverage rose +1.6 points to 57% (98th percentile for the year). Single-stock activity was muted, as long buys were offset by equivalent short sales. Health Care, Utilities, and Financials were the most net bought sectors, while Communication Services, Information Technology, and Energy were the most net sold.
Financials emerged as one of the most net bought sectors for the week, continuing a streak of 3 consecutive weeks (and 10 of the last 13 weeks), driven by long buys outpacing short sales 2 to 1. Conversely, Energy was among the most net sold sectors for the 6th consecutive week, as Hedge Funds continued to exit the sector amid WTI crude oil trading near multi-year lows.
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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!