Futures are near 3880, off of 3850 overnight lows. We noted several times here that “volatility of volatility” will be a key theme this year and that seems to be manifesting. The velocity of yesterdays move, particularly at the open seemed remarkable. The SPX covered ~65 handles in ~30 minutes.
3900 holds as major resistance, with our gamma flip lines at 3850. We note there are two large Combo strikes at 3875 and 3880 which aligns with last nights close and current ES prices.
3850-3900 has formed as a “neutral zone”, with a bullish edge >3900 and elevated risk under 3850. For now we view markets in a “consolidation” phase, and maintain that its under 3800 wherein dealer flows turn materially negative.
QQQ and IWM both hold a fairly large negative gamma position which infers higher volatility in those indicies. While yesterdays dip was bought the potential is still there for further violent moves.
Somewhat related to “violent moves” and “volatility of volatility” is the VIX futures curve. We have been getting a lot of questions about this, and wanted to comment here. VIX futures are generally in contango (back month prices are>front month). The amount of contango has been greater than levels seen historically and so there is arguably more potential for a large shift or “snap back” of front month higher to match the VIX futures at later dates (circles below).
In a real crash we would see those front month VIX futures prices shoot higher than back month – aka “backwardation” (see below). Essentially this means that there is a lot of “volatility potential” imbedded here which could add to the speed of moves ahead, particularly in a down scenario.
Macro Note:
March OPEX range TBD
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ | ||
|---|---|---|---|---|---|---|---|
| Ref Price: | 3852 | 3550 | 386 | 13056 | 321 | ||
| VIX Ref: | 23.11 | 23.11 | |||||
| SG Gamma Index™: | 0.47 | 0.14 | 0.05 | 0.00 | -0.11 | ||
| Gamma Notional(MM): | $-128 | $-746 | $27 | $0 | $-657 | ||
| SGI Imp. 1 Day Move: | 1.18%, | 45.0 pts | Range: 3807.0 | 3897.0 | ||||
| SGI Imp. 5 Day Move: | 3890 | 2.08% | Range: 3810.0 | 3971.0 | ||||
| Zero Gamma Level(ES Px): | 3843 | 3867 | — | 0 | |||
| Vol Trigger™(ES Px): | 3850 | 3850 | 387 | 13125 | 328 | ||
| SG Abs. Gamma Strike: | 3900 | 3900 | 385 | 12800 | 320 | ||
| Put Wall Support: | 3700 | 3700 | 380 | 12500 | 310 | ||
| Call Wall Strike: | 4000 | 4000 | 395 | 13700 | 350 | ||
| CP Gam Tilt: | 1.17 | 0.47 | 1.01 | 1.02 | 0.55 | ||
| Delta Neutral Px: | 3776 | ||||||
| Net Delta(MM): | $1,097,711 | $1,123,576 | $196,858 | $35,290 | $77,179 | ||
| 25D Risk Reversal | -0.09 | -0.1 | -0.1 | -0.11 | -0.11 | ||
| Top Absolute Gamma Strikes: SPX: [4000, 3900, 3850, 3800] SPY: [395, 390, 385, 380] QQQ: [325, 320, 315, 310] NDX:[13700, 13000, 12800, 12500] SPX Combo: [3879.0, 3929.0, 3875.0, 3952.0, 3902.0] NDX Combo: [12811.0, 13007.0] SPX resistance is: 3900 .Reference ‘Intraday Support’ levels for support areas. The total gamma has moved has moved UP: $-128MM from: $-747.00MM Gamma is tilted towards Puts, may indicate puts are expensive Negative gamma is moderate favoring further swings in the market |
