S&P 8000 Call Math Check — Full Breakdown & Transcript

[00:02] call's pretty specific. A 10 to 20% drop in the S&P between August and October, followed by a rally to 8,000 by year end with 8,400 to 8,800 as the upside case. So far, the tech correction showed up early. Since July 6th, the S&P's down

[00:18] about 3% while the Nasdaq is down more than 6%. Here's the math. At 7,300, the S&P needs just 9.3% to reach 8,000, but a 10% drawdown puts the starting point at 6,800, meaning a 16% rebound is required. A 20% drop takes it to 6,000,

[00:35] requiring a 31% rally. And the options, they put a 23% implied probability on finishing above 8,000 by the end of the year versus just 2% above 8,800 in SPX.

[00:48] So, the math check is this. Lee may be nailing the tech correction, but the big question is whether the S&P actually takes the deeper hit his road map requires. Let's check it out on this edition of Options Math Check.

[01:02] So, we're in the tasty platform, and uh there's a couple of things that I'd love to to bring up here. First of all, I think the Nasdaq call is the right call. I mean, Nasdaq is super concentrated. If you look at the makeup of SPY versus the

[01:19] makeup of QQQ, you will see that the QQQ products are significantly more heavy heavily weighted towards those tech sector products that are getting Microsoft seeing a big rally after earnings, uh but Meta down big today.

[01:34] Apple is is up near highs, but really that's that's the question. Will the that's that's the question. Will the tech space uh allow for the S&P 500 to what's really interesting and something

[01:46] we've been talking about in the morning show is just the difference between the gains in RSP, which is an equal weighted S&P 500 product, versus SPY and versus up here. This is a cool feature you can use on

[02:02] download the new desktop platform, you can get this as well. So, if you click on this little compare button at the top of the charting package, you can type in up to five different symbols and chart them out. I changed my line graph or the

[02:16] chart graph to a line so that they all look similar, but the blue line here is the queues. This is a look back from April of 2026, a 2-hour chart. So, you can see here we're dealing with a product in the queues that was up 17%

[02:31] this year, but has fallen drastically down and was only up a couple of percentage points up until this most recent rally today seeing a massive rally here just today. But, when you zoom in, this is where the

[02:45] things start to get really interesting. You zoom in and you zoom in and you start to see, okay, wow. We've got this green and red okay, wow. We've got this green and red graph here. This is RSP up 6%. This is

[02:57] back May May 15th, so middle of May. You can see the divergence is super clear. The queues have sold off pretty dramatically. The S&P's SPY right in the middle here in this yellow graph

[03:09] basically chopping around flat, but the equal weighted S&P product is trudging higher and has recently hit all-time highs. So, that's really the the situation here. We're not seeing capital flow out of these markets. We're seeing

[03:23] a pure sector rotation or a clear sector rotation as clear as I've seen it in many many years. This morning we pulled up a chart of the top 20 stocks that have hit all-time highs recently and

[03:35] it's none of the names you would think. It's you know, products that you haven't talked about for many years. It's not your Nvidias, your Apples well Apple was in there, but it's not your Microsofts, your Nvidias, your Netflixes. It's these

[03:48] other products that are more consumer products, uh heavy products. So, the tech space has really been the the sector that's taken it on the chin. So, going Are we going to have a big sell-off in the S&P's and then a rally

[04:02] up to 8,000? Well, if you look at SPY specifically, we haven't gone anywhere over the last month and a half. But, RSP, the equal-weighted S&P 500 product, has gone up 6% in the same period. SPY's flat and

[04:17] the Nasdaq is down 5% and this is again from uh April, May uh May 15th here. So, lots to discuss, lots to look at, but we got to look at SPX because SPX is going to be our tried and true uh product here when it comes to picking

[04:32] these numbers, 8,800, going down to 6,000, etc., etc. So, if we go to the end of the year, we can clearly see that 8,000 is well we look at the in-the-money probability

[04:46] at 8,000, we're dealing with a 23% probability, which is actually within the expected move. This orange bar expected move goes all the way up 611 volatility, uh and that is, you know, well within

[05:00] the expectation here. 23% implied uh in-the-money probability percentage is about a coin flip that we'd get to this 8,000 mark at any point before the 154-day expiration cycle. But, the further up you go, the more aggressive

[05:14] you get on this call, 8,800, I just don't see. Like, 8,800 we'd have to have a complete continuation of this market today, up 110 points, Nasdaq up almost 1,000 points today, just an absolute insane move to the upside. That's really

[05:29] the only way we get up there, with no with no stopping. We could see a little from now until the end of the year, we would need the VIX in the low teens, we would need to see contango in the VIX futures market, and really nothing that

[05:43] would stop or disrupt the rally up to 8,800. Cuz right now, 2% probability that we get to 8,800 by the end of the year, and that's beyond the two standard deviation mark here. So, 8,000 well within the probabilities,

[05:58] 8,800 not so much. That's another 10% after you reach 8,000. But still, only 600 points away from the current price of 7,400. What's really interesting, I think, is if you look at the 8,000 strike trading for $9,300 to the upside.

[06:14] It's about 600 points out of the money, and then you go down to the 6,800 strike, which is about 600 points out of the money to the downside, and you see there's still put skew here. Higher probability of being in the money and a

[06:27] much higher premium at 12K versus 9,300 to the upside. So, the velocity moves can still be perceived to be to the downside. I mean, you typically see put skew in SPX, don't get me wrong, but it is still interesting to see that we've

[06:41] got higher probabilities, bigger bid-ask spreads here, bigger premium at the 6,800 level, which would bring us down to, you know, 600 points out of the money from here, even after this big rally to the upside, where you're

[06:55] probably still seeing a little bit of probability and premium getting infused into this upside because the move today is so aggressive. But again, RSP, if we go back to this chart, the equal-weighted S&P 500 product has

[07:09] really taken the reins here. If we look at, you know, a monthly chart or a at, you know, a monthly chart or a weekly chart and isolate RSP versus SPY. RSP taking the gains, SPY kind of flat, and then the Qs have really have really

[07:24] been hit. So, the Nasdaq, sure, I think we could see a bigger bigger sell-off in Nasdaq because it's so concentrated, and those names are really the ones that at Meta today. It's just sliding, down 55 points, crazy move

[07:39] just sliding, down 55 points, crazy move to the downside, and it's it's diverging this blue line here, the Qs, we're seeing a decent rally from the lows direction. So, again, just looking at RSP versus SPY, I

[07:55] think this tells the story. We would need the components of SPY that are lagging, like the Mag 7 stocks, to recover to get to catch up to the performance of RSP. But again, the NASDAQ is dragging everything down.

[08:08] These these components of the tech space are dragging down the performance of SPY and the S&P 500. So, something has to change. We'd have to see this thing flip. We need the NASDAQ to continue this massive rip today. And then maybe

[08:22] we can start talking about 8,000, 8,200, 8,400, 8,600, and 8,800. But, until we see some continuation to the upside, I think 8,800's off the table. But, 8,000 well within the expected move right now. But, let me know what you think in the

[08:37] comment section in this video here and also the YouTube chat. already, and we'll see you on the next episode of Options Math Chat.