| Quite a bit of movement in futures overnight as we tagged a high of 3185 before pulling back to 3140. There were a few interesting developments, the key of which being in our equity data. Even though equities in general had a strong move yesterday we saw a fairly large drop in call gamma. Zeroing in on the big names we saw that despite a 4% move in our “FANGMAN” index, call gamma dropped by a sizeable amount(see here). Normally I’d expect this type of drop to occur over a big expiration, so this move is strange (particularly given that strong price move higher). This is certainly something to watch, and could mark a sentiment change in the market leaders.
Back to index levels we also saw some strange shifts. You’ll note that the Put Wall and Vol Trigger have both jumped to the 3170 area. Typically these major jumps don’t “stick” and reflect a temporary shift in the landscape, but it does reflect a lack of call positions. If we had solid open interest >3150 these “jumps” probably wouldnt happen. This is reinforced by the drop in Notional Gamma levels which declined despite higher markets yesterday. We’re reading this shift as resistance in the 3175 area particularly given that we see large Combo levels in that same 3170-3180 range. To the downside we still think “buy the dip” gets the benefit of the doubt unless we break 3100, at which point negative gamma could grab hold and infer a larger move down. Todays data certainly reads like topping action which doesnt have to signal “crash” but does suggest a tired market. |
| Market Outlook: |
| July positions remain very light with 3100 the largest strike. We mark 3000 to the downside and a weaker upside target at 3200.</ |