Jan. 5, 2026 - Market Moves with Volland: Dealer Positioning & Trade Strategies

Summary

In this episode of *Market Moves*, hosts Jason and Jay discuss recent geopolitical events, including the capture of Venezuela's leader, and how they could impact global markets, especially commodities like oil and gold. They explore the importance of upcoming jobs data and its effect on the economy, touching on volatility and trading strategies for the week. Both are cautious about the market's dependence on AI stocks, forecasting a slow market drawdown. They emphasize watching key levels on the S&P and options flows, predicting a tough year ahead, with earnings and geopolitical events playing pivotal roles.

Takeaways

• 😀 The market is heavily influenced by AI stocks, which have been the main driver of bullish momentum, but there is skepticism about its long-term sustainability and effectiveness.
• 😀 Geopolitical events, such as the situation in Venezuela, can have significant impacts on markets, particularly in commodities like oil and gold, which can create short-term trading opportunities.
• 😀 There is a concern about the U.S.'s foreign policy and its implications for global stability, especially regarding the situation in Taiwan and potential conflicts with China.
• 😀 The S&P 500 is expected to face a slow drawdown in 2023, with key support levels around 6,000, but market movements will depend heavily on geopolitical events and volatility data.
• 😀 Jobs data and unemployment rates are the primary focus for the market in the near term, as they will provide crucial insights into the health of the economy and potential rate cuts from the Federal Reserve.
• 😀 Negative Vanna is a concern, as it often leads to negative market movement, but the exact timing of this impact may depend on how close expiration dates for options are.
• 😀 AI stocks, especially those related to data centers and chips, are expected to continue their strong performance in 2023, although the focus will shift more towards AI software and its implementation.
• 😀 VIX spreads and volatility are important to track, but they are often difficult to trade profitably due to the strong mean reversion of the VIX.
• 😀 There is a view that markets will experience less dramatic 'buy the dip' opportunities in 2023, with smaller drawdowns expected as volatility remains in play.
• 😀 The option market is experiencing significant positioning around critical levels such as 6,900 and 6,000 on the S&P 500, and volatility data (Vanna, gamma) will play a crucial role in determining market direction.

Q & A

What geopolitical event is discussed in the video?

The geopolitical event discussed is the capture of the Venezuelan leader, which sparked volatility in commodities like oil and gold, as well as political tensions surrounding the U.S.'s foreign policy.

How does the geopolitical situation in Venezuela impact the market?

The situation leads to a surge in commodity prices, particularly oil, due to the potential for instability in Venezuela, which has large oil reserves. This situation can affect companies tied to these commodities, such as Chevron.

What key economic data are the speakers focusing on for the week?

The speakers focus primarily on jobs data, which is a crucial economic indicator. They discuss the importance of employment numbers and how they could affect market sentiment and monetary policy decisions.

What concerns do the speakers express about the U.S. government's foreign policy?

They express concern about the implications of U.S. interventions in foreign nations like Venezuela and its impact on America's global standing, with a particular emphasis on how this may affect future relations with countries like China and Russia.

What is the primary risk facing the economy, according to the speakers?

The primary risk facing the economy is rising unemployment rates. The speakers emphasize that sustained job growth is crucial for economic stability, and any deterioration in the job market could lead to more rate hikes or a recession.

What are the speakers’ views on AI’s impact on the market?

While they acknowledge the significant role of AI in driving market momentum, they express skepticism about its long-term effectiveness. They worry that the hype around AI, particularly its software and implementation phases, could be overstated.

What concerns do they have regarding the financial risks of AI investments?

They are concerned about the liquidity and financial stability of companies heavily investing in AI. There’s a risk that companies may face higher interest payments on debt used to fund AI investments, especially if the AI outcomes don't meet expectations.

What is the expected market trend for the year according to the speakers?

They predict a volatile year with slow market growth. While they expect bullish momentum in AI stocks, they caution against overly optimistic predictions and foresee potential drawdowns, with significant support seen around 6,000 points on the S&P 500.

What role does Vanna and gamma play in the traders' strategies?

Vanna and gamma are used to assess market sentiment and volatility. The speakers use these metrics to predict price movements and adjust their trading strategies. They discuss how negative Vanna, especially in certain price zones, could indicate resistance levels where the market might face sell-offs.

What specific levels are the speakers watching for the S&P 500 this week?

The speakers are closely watching the 6,850 to 6,900 range for resistance, with the potential for a short opportunity if the market surpasses this level. They also monitor the 6,800 to 6,750 range as key support zones.