Informe SG Levels

Futures had a fairly volatile session, currently near 4475 which is off of 4454 lows. As anticipated our models predict a very volatile day, with an S.G. implied move of 1.9%.  Resistance lies at 4500 then 4530. Support is at 4464 and 4404.

The updated data shows some fairly large put positions added to the S&P <=4400, and it was clear in our HIRO data (intraday delta measurement) that put buyers were out in QQQ as well.  Some of this flow was clearly short dated, as we now measure ~20% of SPX & QQQ gamma expiring today.

If selling increases, our models seem to show 4400 as a support area for today. Below we show our EquityHub model which shows a “node” of gamma at 4400. In past instances of weak markets these nodes have shown to be linked to support areas. We’d also note that the QQQ gamma profile flattens out <=340 which suggests that the rate of gamma hedge decreases (aka declining negative gamma pressure).

Looking out past a few sessions, it appears a break of the 4350 area implies a test of 4200.

To the upside that we’d anticipate resistance in the 4535-4550 area, which is where our Vol Trigger lies (4535) and also a pickup in “straddle” positions (15k each added to 4550 call/put y’day). New call positions yesterday at strikes above were unsurprisingly light, suggesting that flows will continue to be driven by the shifts around puts being bought (negative delta demand) and sold (positive delta demand). Lifts from the selling of implied volatility would likely be quick, but violent (ie high vol-of-vol). It seems unlikely that implied volatility will revisit ’21 lows until interest rate issues are cleared up.

A close back of the Vol Trigger level shifts the ball back into the bulls court, with 4600 the major overhead target for early next week.