From the Grain Pits to the S&P: Commodities Are Starting to Tell a Much Bigger Story

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Founder's Note:

PM Note

The stock market fell as Treasury yields reversed higher, despite Treasury Secretary Scott Bessent flagging the potential for larger Treasury buybacks and an upcoming fiscal plan. Crude oil continued to march higher, trading above $85 at the time of writing. The S&P 500 lost 0.9%, with Walmart shares sinking 9%—the most since 2022—following disappointing sales.

SPX traded within a 79bps range and closed at 7,641, below our Risk Pivot of 7,650. Meanwhile, the volatility complex expanded following VIX expiration yesterday. VIX closed at 16.02 (+8%), while VVIX closed at 89.86 (+4%). The break above VIX 16 is notable, as traders hold a 204k-lot short put position at the 16 strike. We would monitor whether VIX can remain above 16 heading into OPEX tomorrow, as previous resistance could now become support.

A massive -$10bn of S&P 500 HIRO flow accompanied the market lower, indicating substantial negative options-driven delta pressure. As SPX remains in a positive gamma regime, some of that selling pressure was absorbed. 

Roughly half of the S&P 500 HIRO flow was driven by longer-dated put buying (dark blue line), suggesting more defensive positioning ahead of upcoming catalysts including OPEX, Nvidia earnings, and Jackson Hole.

On the S&P Equities HIRO side, overall flow was dominated by longer-dated call selling. Mag 7 and software lagged, while memory and semis led the tape. 

Nasdaq HIRO registered -$5bn of delta notional on the day, dominated by 0DTE call selling (green line). The flow became more linear after 2:00 p.m. ET, appearing more consistent with quant/systematic activity than discretionary trading.

Fixed Strike Vols were mixed on the day. With implied volatility compressed heading into OPEX, we would expect greater potential for volatility expansion post-OPEX.

Our Synthetic OI shows that a large amount of SPX dealer long gamma is set to roll off tomorrow. The removal of this positive gamma could reduce market stability and potentially allow for greater volatility expansion thereafter.

FlowPatrol winners of the day were IWM puts. We flagged 40k IWM September 286 puts and 44k IWM September 288 puts. IWM dropped 1.3% on the day, as small caps are more sensitive to interest rates. These puts rose 50% and 56%, respectively.

It is also notable that IWM has an IV Rank of 3%, meaning its implied volatility is relatively low compared with its range over the prior year. 

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ES Levels

ES Daily Trading Guidance

The bull/bear line for the ES is at 7678.25. ES is currently trading around 7687.50, putting price slightly above this key pivot. Holding above 7678.25 keeps the immediate bias constructive, but the recent sharp decline means bulls still have significant overhead resistance to work through.

On the upside, the first major objective is 7725.25, today’s upper range target. Just above that are 7733.00 and the previous high at 7746.50. If buyers can clear this resistance zone, the next upside level is 7769.50. A sustained recovery above 7769.50 would improve the broader setup and open the door toward 7835.50.

On the downside, 7678.25 is the first support and the key dividing line for the session. Below it, watch the previous close at 7662.50 and the previous low at 7657.75. Losing that support cluster would shift control back to sellers and target 7631.25, today’s lower range target. A decisive break below 7631.25 could extend the decline toward 7587.00.

Overall, ES has regained its bull/bear line, but this remains a recovery attempt following a substantial selloff. The short-term bias is bullish above 7678.25, with 7725.25–7746.50 the important resistance zone. Below 7678.25, the setup turns defensive again, with 7662.50, 7657.75 and 7631.25 the primary downside objectives.

NQ Daily Trading Guidance

The bull/bear line for NQ is 29358.75. NQ is currently trading around 29481.75, putting price back above this key level and giving buyers the near-term advantage. Holding above 29358.75 keeps the door open for a continued rebound, while a move back below it would quickly weaken the setup.

On the upside, initial resistance is 29561.50, followed by the upper range target at 29658.75. Just above that sits 29689.75, making the 29658.75–29689.75 area an important resistance zone. If buyers can clear that area and hold above it, the next major upside objective is 29941.00.

On the downside, 29358.75 is the first important support. Below it, watch 29300.50, followed by 29236.25 and 29202.75. The lower range target is 29059.00. A sustained break below 29059.00 would put 28776.50 into play.

Overall, NQ has a constructive intraday bias while holding above 29358.75, but the recent sequence of large bearish candles shows that the broader market remains vulnerable. Buyers need to reclaim 29561.50 and then the 29658.75–29689.75 resistance zone to demonstrate that the overnight recovery is developing into something more substantial. Below 29358.75, the bias turns bearish again with 29300.50, 29236.25, and 29202.75 as the first downside objectives.

Polaris Trading Group Summary - For Thursday, August 20, 2026

Thursday’s Cycle Day 1 unfolded largely according to David Dube’s roadmap, with the market completing expected downside objectives and showing notable weakness into the close. The session reinforced the value of preparation, patience, and staying aligned with the broader cycle structure rather than reacting impulsively to each move.

Overnight setup

• David identified 7730 as the key Line in the Sand.

• The upside target at 7745 was fulfilled overnight.

• Price then reversed lower and worked toward the 7695 downside objective before the regular session.

• The early action closely matched the prior day’s projected scenario.

Morning structure

• Zero Gamma was identified at 7683.

• The D Level near 7689.25 became an important reference area.

• Yesterday’s low and developing lower highs were closely monitored.

• The room discussed reclaim and rejection setups around key levels.

• David emphasized that good trading comes from preparation and being “Pro-Actionary versus Reactionary.”

Positive trades

• David confirmed an A4 first-pullback short around 11:16 AM.

• During the lunch period, both A4 and A100 produced solid short runners.

• The short setups aligned well with the broader Cycle Day 1 downside structure.

• The projected average decline zone at 7669–7665 was ultimately fulfilled.

Afternoon development

• After lunch, David noted that the A10 setup was also playing out.

• Attention shifted to whether a secure Cycle Day 1 low had formed.

• At 2:00 PM, the answer was still no, which proved important as downside continued.

• The market eventually extended into the projected average decline zone.

Closing action

• The final Cycle Day 1 low printed at 7659.

• David noted that the low came very late in the session.

• The late low suggested significant underlying weakness.

• Traders were advised to remain aware of possible downside spill-over into Friday.

Key lessons

• Prepare key levels and scenarios before the market reaches them.

• Let price confirm a low rather than assuming one has formed too early.

• Align trades with the broader cycle structure whenever possible.

• Small, disciplined wins can be just as valuable as larger runners.

• Late-session weakness can provide important clues for the following trading day.

• The strongest opportunities came from staying patient and allowing the Cycle Day 1 decline to fully develop.

DTG Room Preview – Friday, August 21, 2026

Macro / Rates

• US index futures remain sensitive to elevated Treasury yields, fiscal concerns and rising interest costs tied to the national debt.

• Reports that several Fed officials favored a rate hike last month are keeping rate expectations volatile.

• Any shift in Treasury buybacks or issuance strategy could create additional intraday volatility.

Geopolitics / Crude

• President Trump’s announcement of an “economic warfare” operation against Iran adds another layer of geopolitical risk.

• Crude remains a key intraday driver, with higher oil potentially complicating the Fed’s inflation outlook.

• Energy, defense and shipping names could react sharply to any escalation.

Consumer / Earnings

• Walmart is signaling softer spending trends, while Target points to greater resilience among higher-income consumers.

• The divergence reinforces the ongoing K-shaped consumer theme.

• Premarket earnings include BJ and BEKE.

Gold / Dollar

• Gold is on track for a third straight weekly gain as Treasury buybacks ease bond-market stress and pressure the dollar.

• Continued yield stabilization could support further flows into metals.

AI / Corporate

• AI-related corporate developments remain a potential source of index volatility.

• Anthropic IPO expectations, SpaceX share-unlock pressure and Samsung shareholder-return discussions are all in focus.

Economic Calendar

• 8:30am ET: Philly Fed Manufacturing Index

• 8:30am ET: Weekly Unemployment Claims

• 10:00am ET: CB Leading Index

ES Technicals

• Volatility remains moderate, with the 5-day average daily range at 62.25 points.

• No meaningful overnight whale bias was detected.

• ES is approaching key 7620/15 trendline support.

• A clean break below 7620/15 could open a move toward the 7500 area over the next couple of sessions.

• The 50-day MA at 7583.50 remains loose support below.

Key ES Levels

• Resistance: 7847/52

• Support: 7620/15, 7460/65, 7306/01, 7115/10