Futures were flat overnight, holding the 4540 area. Now that the quarter end options flows have settled out, we see a small uptick in our volatility estimates for today: 0.75% implied open/close move. 4500 is critical support with resistance at 4550 and then 4600.
As noted last week, the S&P is in a “void” of sorts while prices are near 4550. 4600 is our Call Wall level, which is where we see significant resistance and the top of our range. 4500 is where gamma flips to negative. We expect the market to shift to one of these levels by tomorrow, which sparks the next “cycle”. These cycles are driven by feedback loops.
In this case 4600 is the gateway to material positive gamma, which is where we see dealer flows supporting stock prices. This opens more call activity and a market that grinds higher via reflexive volatility selling.
The downside of the void is 4500, which is the last line of support. Below 4500, we see gamma as materially negative which would coincide with a spike in implied volatility. These forces could speed up a drawdown, and likely invoke a test of 4400.
Whats interesting here is that 4500 is not particularly large in SPX terms; its mainly SPY 450 that’s has some gamma related size. For the S&P complex as a whole we don’t see much in the way of put protection until the 4300 area (i.e. 4300-4500 is underhedged). This suggests that if the market moves lower then traders would need put protection, which increases dealer shorting (via negative deltas).
On this point of “SPY” being larger, we still have the SPY/QQQ vanna charts suggesting more relative volatility vs SPX models (charts here). We discussed this on Friday (here) and this leads us to give edge to more market movement today, pushing that 0.75% SPX implied move. In other words, 4600 & 4500 are ~1% away which seems like reasonable targets today through an SPY/QQQ lens.
As noted above, based on the action or shift in markets today we look for a new bullish or bearish cycle to initiate going forward (vs the 4600 “pin” from last week). For now bulls hold the edge as long as the market holds 4500.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4545 | 4544 | 452 | 14861 | 361 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
0.75%, | (±pts): 34.0 | VIX 1 Day Impl. Move:1.23% | ||
| SpotGamma Imp. 5 Day Move: | 1.98% | 4545 (Monday Ref Px) | Range: 4456.0 | 4636.0 | ||
| SpotGamma Gamma Index™: | 0.39 | 0.05 | -0.21 | 0.04 | -0.09 |
| Volatility Trigger™: | 4515 | 4530 | 452 | 14050 | 361 |
| SpotGamma Absolute Gamma Strike: | 4600 | 4500 | 450 | 14225 | 360 |
| Gamma Notional(MM): | 30.0 | -52.78 | -877.0 | 4.0 | -475.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4540 | 4539 | 0 | 0 | 0 |
| Put Wall Support: | 4300 | 4300 | 440 | 14000 | 355 |
| Call Wall Strike: | 4600 | 4600 | 460 | 14225 | 375 |
| CP Gam Tilt: | 1.12 | 0.96 | 0.73 | 1.49 | 0.68 |
| Delta Neutral Px: | 4455 | ||||
| Net Delta(MM): | $1,389,074 | $1,341,994 | $158,271 | $47,465 | $95,235 |
| 25D Risk Reversal | -0.08 | -0.06 | -0.07 | -0.08 | -0.07 |
| Call Volume | 364,181 | 1,425,178 | 6,820 | 514,270 | |
| Put Volume | 843,920 | 2,090,629 | 7,988 | 919,010 | |
| Call Open Interest | 4,272,356 | 5,053,216 | 44,206 | 2,984,314 | |
| Put Open Interest | 9,006,232 | 11,880,103 | 47,798 | 6,492,103 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4600, 4550, 4500, 4400] |
| SPY: [460, 455, 450, 440] |
| QQQ: [370, 360, 355, 350] |
| NDX:[15500, 15000, 14225, 14000] |
| SPX Combo (strike, %ile): [4600.0, 4650.0, 4550.0, 4450.0, 4623.0] |
| SPY Combo: [458.36, 463.34, 453.37, 443.41, 460.62] |
| NDX Combo: [14579.0] |
