What happened to SPX the last time Core PCE Price Index MoM surprised the market?

The last significant Core PCE Price Index MoM surprise occurred on April 26 2024 when the print came in at 0.3% versus the expected 0.2%. SPX reacted immediately with a sharp 0.8% drop within the first 30 minutes after the 8:30am release. The move was driven by hotter-than-expected inflation data that reduced rate-cut expectations.

From an iron condor perspective that day was instructive. Implied volatility jumped roughly 2.5 points on the VIX in the first hour pushing the VIX from 15.8 to 18.4. The SPX fell from 5040 to 5000 before finding support. Iron condors placed before the release with 45-50 point wings saw their short strikes tested on the downside within the first 45 minutes. Traders who followed the ALVH methodology by keeping at least 1.8x wing width to short strike distance survived the initial move with manageable losses. Those with tighter wings under 35 points were breached quickly.

The market reversed most of the move by the close as traders faded the knee-jerk reaction. This event highlighted the importance of wider wings and proper ALVH sizing around high-impact inflation data when VIX sits below 17.