S&P futures roll to a new contract every quarter, which is why September shows up about 62 points above June even though nothing moved. It’s cost of carry: futures skip the dividends but tie up far less cash, so the price bakes in a few months of net financing. An ETF like SPY is the mirror image, full cash and dividends in your pocket, no roll. Same exposure, different plumbing. The 62 points are carry, not a rally.
For us, it means the level map just moved up to September. The September contract settled 7,497.50 Friday, about 62 points above the June one, and already back above our pivot. June itself expires this Thursday at the quad-witch, which is what kicks off the roll. Keep one thing straight as you read: last week’s flush low of 7,232 was a June price, roughly 7,295 in September terms, so every level below sits a touch higher than the ones from last week.
With that out of the way: last week we wrote that a falling market with a rising score is the buy signal, and that the harder half of the job was buying fear at the lows. The lows came Thursday. The fear print never did. The market turned anyway and crushed volatility on the way. When the danger drains out of a market while price recovers, that’s the recovery confirming itself, not a trap.
Three things flipped in our favor since Sunday. Volatility collapsed, with the VIX at 17.68 Friday, down from 22 at midweek. The Iran headlines went from active strikes to a reported peace text, and oil broke to an eight week low near $85. And SpaceX listed up 19% on its first day, the largest IPO ever, which tells you risk appetite is alive, not hiding.
And the broadening is the real story under the price. The equal-weight S&P and the Russell 2000 both printed fresh all-time highs Friday, with the cap-weight index still below its own. The average stock and the small caps are already at new highs; the index just hasn’t caught up. That’s the opposite of how tops form. We called the Russell’s four-year base breakout back in April and said to own the names, not the index. Those new highs Friday say the call held, and the same leaders we flagged then, the semi-equipment, power, and optical names, are still the ones leading now.
Here’s the catch, and it’s the whole week: the index has recovered most of the decline but hasn’t reclaimed its own record yet, and Wednesday brings Kevin Warsh’s first meeting as Fed chair. Inflation ran hot this month, the market now prices roughly even odds of a rate hike by year end, and a hawkish first impression from a hawkish new chair is the one thing that breaks the recovery. The bounce earned the right to be here. It hasn’t earned the right to chase toward the record ahead of that meeting.
The Lie: +1 CONSTRUCTIVE. Was -2 recovering at midweek, -4 a week ago. The repair is real. The size stays measured into the Fed.
One observation reframes the week, and we flagged the signal that called it. Wednesday we wrote that the order book, the resting bids that absorb size, had thinned to its lowest since the COVID crash, the SVB weekend, the yen-carry unwind, and the tariff break. All four marked a tradeable low within a week, up about 10% a month later. The fifth just printed, and that June low at 7,232 held the way the strongest lows do: without a single capitulation signal. No volatility spike, no day where puts swamped calls, no washed out breadth. In April the low needed all that fear first. This time the big money just absorbed the flush and bought. A low that holds without panic is the stronger kind. The catch is the same fact in reverse: with no fear ever printed, there’s no cushion under this market either. Both halves are true at once, and that tension is the week.
how’d it go?
Below the fold: the level by level scorecard, the six levels that matter, the two trades we’re putting on, where the rotation is going next, and why the week after this one matters more than the week itself.
