14/01/2026 – SPX Analysis: Rejection at 7,000 and Warning Signs: Is Market Turbulence Ahead?

What's more interesting, however, isn't so much the price decline but what's happening in the volatility market.

Good morning everyone,

Yesterday we witnessed an important technical move: the S&P 500 was rejected in the 7,000 zone during the pre-market session, and since then has been trading below its key support level at 6,950. As I write this, the index sits near 6,897, down -0.95%.

Volatility Awakens from Its Slumber

The VIX, that barometer of market fear, is up 11.51% to 17.82. But what’s truly relevant is the behavior of the VVIX (the “volatility of volatility”), which has spiked 8.53% to 101.07. This indicator is telling us that investors are starting to pay more to protect against sharp moves, even when the market on the surface appears calm.

Fixed-strike implied volatility continues to expand, confirming that something is shifting in the market’s structure.

The Gamma Map: Critical Levels to Watch

This is where things get technical but important. The “Gamma Flip” level has risen to 6,925, making 6,900 an absolutely critical support. Why? Because below that level, the market would enter negative gamma territory, an environment that tends to amplify price movements in both directions.

Currently, dealers (market makers) are providing support to the market through positive vanna and charm flows. However, this safety net will disappear after Thursday’s OPEX, potentially opening the door to larger and potentially violent moves.

Key levels for this week:

• Gamma Flip: 6,925

• Call Wall (resistance): 7,000

• Put Wall (critical support): 6,900

• Volatility Trigger: 6,950

The 7,000 strike continues to concentrate the largest amount of gamma, acting as a magnet for price. The market is pricing in an implied move of approximately ±0.95% for the rest of the week in either direction.

Warning Signs We Shouldn’t Ignore

1. The COR1M Indicator Is Flashing Red

When this indicator closes below 8, it has historically preceded significant corrections:

• July 2024: -9.2% drop

• January 2025: -21.35% correction

• October 2025: -5.76% decline

Such low COR1M levels typically coincide with excess complacency in the market—that moment when everyone thinks nothing can go wrong... right before something does.

2. Volatility at Lows Near All-Time Highs

We’re in a paradoxical situation: the market is trading near all-time highs while volatility is at lows. This combination is historically unstable. It’s far more likely that volatility will spike from these levels than continue to compress.

Any news that the market perceives negatively could trigger a sharp jump in volatility, especially given the low level of hedges currently in the system.

What the Big Banks Are Seeing

Goldman Sachs: Rotation, Mixed Results, and Software Weakness

Yesterday’s session was revealing. Although the S&P 500 only fell 19 basis points to close at 6,964, the market’s internal action was more complex:

Bank earnings: JPMorgan (-4%) and Bank of New York (+1.7%) reported earnings that met expectations but failed to clearly beat them. More importantly, we saw two concerning dynamics:

1. The “run it hot” trade (the bet on strong economic growth and active capital markets) lagged across all financial subsectors.

2. Financial services with consumer exposure continued to discount political risk following Trump’s comments supporting the Credit Card Competition Act.

Software in free fall: The tech sector shows significant weakness, with drops of 3%-7%. Salesforce plunged 7% yesterday, its worst session since May 2024. This appears to reflect both position reduction ahead of earnings and lack of confidence to maintain exposure.

Capital flows: Hedge funds continue to rotate rapidly, while long-only investors show more patience. The only sector with clear demand was Industrials, which saw the highest buyer bias since November.

Derivatives: Volatility of Volatility Is Sending Signals

The derivatives market is showing peculiar behavior. Despite the S&P 500 barely moving, “volatility of volatility” (vol of vol) experienced a significant increase in demand. The SPX skew reacted quickly, although spot volatility and gamma didn’t capture real demand.

What’s interesting is the divergence in flows:

• Real money accounts: buying puts and put spreads (protection)

• Vol accounts: selling the move in vol of vol and skew

Additionally, I detected a notable hedging operation: an investor bought approximately 20,000 SPY 680/690 put spreads expiring January 23rd. This trade would pay 4x the premium invested if SPX drops -2.1% from current levels (~6,950). It’s a fairly attractive trade and signals that someone with resources is buying protection.

Charlie McElligott: Old Narratives, Little Real Reaction

Despite the return of apocalyptic narratives, Trump’s attacks on Powell, fears about Fed independence, the supposed “end of American exceptionalism 2.0”, the market isn’t reacting with panic.

Equities remain firm, the dollar is flat, and defensive strategies continue to lag. This is striking considering we’re in January, when investors typically increase their hedging budgets (”new year, new P&L risk”).

Why Isn’t the Market Worried?

Two main reasons:

1. Attacks on Powell lack credibility: The market doesn’t believe they’ll actually alter the institutional framework.

2. Fiscal dominance trumps monetary policy: This is the key point. In a world of structurally high deficits and economic populism, central banks are prioritizing growth over monetary discipline.

The global landscape confirms this thesis:

• U.S.: nominal growth near 8%, “pedal to the metal”

• Europe: abandoning austerity, pivoting to fiscal expansion

• Japan: continues stimulating despite elevated inflation and growth

• China: maintains persistent accommodative stance

In this environment, rate movements have increasingly less marginal impact. Monetary policy matters more through liquidity management, balance sheets, and financial conditions than through policy rates themselves.

Implications: The Market Continues to Reward Cyclical Reacceleration

• Real assets (commodities and metals) remain strong

• Global equities in demand, rotation toward small caps and cyclical value

• Emerging markets with persistent buyer flow

• Long end of yield curves unattractive

Tactical Rebalancing vs. Overheating: Timing Is Everything

McElligott points out something crucial: the recent move in equities responds more to tactical rebalancing than a structural shift. Investors are adding economic sensitivity to portfolios historically loaded with AI and mega-cap growth.

This “cyclical value” trade appears temporary, valid for the first months of the year, not a long-term bet. The main risk is a “growth scare” in the second or third quarter.

The Timing Problem

The market could shift tone earlier than expected because:

• Many investors are chasing the rally

• More leverage is being deployed

• Very low volatility creates a false sense of security

That’s why it makes sense to hedge with VIX options, which can benefit if volatility spikes from these historically low levels.

Current situation:

• Equity positions aren’t excessively loaded

• The market isn’t paying much for protection

• An immediate crash isn’t expected

But: If volatility starts to rise, the balance can break quickly. Investors currently selling protection could be forced to reverse positions, amplifying any downward move.

Key Dates for the Next Two Weeks

• January 16: OPEX (options expiration)

• January 21: VIX expiration

• January 29: FOMC meeting

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Conclusion: Caution Without Panic

The market finds itself at a delicate moment. The technical structure suggests vulnerability, especially if we keep losing the 6,900 support. Volatility is awakening from its slumber, and derivatives signals indicate some sophisticated participants are buying protection.

However, the macro context remains constructive: global fiscal dominance, strong nominal growth, and central banks prioritizing growth. As long as that backdrop holds, corrections will be buying opportunities rather than the start of something more sinister.

What to watch:

1. The 6,900 level as critical support

2. VVIX behavior as a leading indicator

3. Post-OPEX action when gamma supports disappear

4. Signs of “growth scare” in economic data

The message is clear: don’t let your guard down, but don’t panic either. Low volatility won’t last forever, and when it returns, it will be quick and potentially violent. Having some protection while the market continues higher isn’t pessimism, it’s prudence.

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Thanks for reading!