| Futures remain flat to last nights close as we expect some volatility into and around the open. During recent monthly expirations there have been several cases of wild opening prints (see here) so its something to be aware of. Also because so much of the SPX expires at the open we generally recommend watching SPY levels for today. This is because SPY expires at the close, along with single stocks. Our equity metrics show that ~53% of equities have their largest gamma position expiring today – so there are a lot of shorter term options expiring. Fortunately the levels more or less rhyme to current SPX with 325 as the top resistance and 320 the main support. It is a bit tough to forecast levels “post expiry” but our view of the situation is that the market still lacks hedges and puts don’t seem in much demand (see the 25Delta chart below). As we have discussed several times recently our worry here is that if put buyers suddenly come out dealers will need to sell futures to hedge. This likely brings a move higher in implied volatility (VIX) which makes puts more expensive. Dealers may then need to sell more to hedge and as the market moves lower it brings out more put buyers (its a cycle dubbed gamma trap). In other words things could escalate quickly here, particularly because it seems like we are going to lose a big chunk of positive gamma with this expiration. Therefore if we do see some weakness today and a breakdown of 3200 I would be concerned for next week as it puts the Vol Trigger/Zero Gamma level possibly in play for Monday. I think a strong case could be made for the options market holding SPX up in the face of recent selling in the FANGs and we are effectively removing the “pin” today. This doesnt have to equate to crash but I do think we are pushing quickly through the 3150-3250 range next week. |
| Market Outlook: |
| 3150 3250 is the range into July Opex (Friday 7/17). |
| Event | Time EST | Actual | Forecast | Previous |
| Prelim UoM Consumer Sentiment | 10:00am | 79.0 | 78.1 |
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ |
| Ref Price: | 3202 | 3199 | 320 | 10581 | 259 |
| VIX Ref: | 28 | 28 | |||
| SG Gamma Index™: | 0.58 | 0.79 | 0.10 | 0.01 | -0.04 |
| Gamma Notional(MM): | $284.00 | $303.00 | $607.00 | $0.00 | $-299.00 |
| SGI Imp. 1SD Move: | 0.94% | 3172.0 | 3232.0 | |||
| SGI 5 Day | 3150.5 | 3.0% | ||||
| Zero Gamma Level(ES Px): | 3146.0 | 3111.0 | — | ||
| Vol Trigger™(ES Px): | 3145 | 3145 | 317 | 10540 | 261 |
| High Gamma Strike Resistance: | 3250 | 3250 | 325 | 3000 | 270 |
| Top Abs. Gamma Strike: | 3200 | 3200 | 320 | 10700 | 250 |
| Put Wall Support: | 2900 | 2800 | 310 | 8500 | 250 |
| Call Wall Strike: | 3250 | 3250 | 325 | 11325 | 270 |
| CP Gam Tilt: | 1.21 | 1.25 | 1.24 | 0.98 | 0.75 |
| Delta Neutral Px: | 3044.0 | ||||
| Net Delta(MM): | $12,022.00 | $12,046.00 | $1,819.00 | $292.00 | $610.00 |
| 25D Risk Reversal | -0.09 | -0.09 | -0.09 | -0.09 | -0.09 |
| Model Forecast: |
| Top Absolute Gamma Strikes: SPX: [3250, 3200, 3150] SPY: [325, 320, 310] QQQ: [260, 257, 250] NDX:[10700, 10600, 10400] SPX Combo: [3238.0, 3213.0, 3248.0] NDX Combo: [10431.0, 10505.0, 10717.0] The PutWall has moved to: 2900 from: 2800 SPX resistance is: 3250. Support is: 3200 .Reference ‘Intraday Support’ levels for support areas. The total gamma has moved DOWN: $283.77MM from: $302.00MM Gamma is tilted towards Puts, may indicate puts are expensive Positive gamma is moderate which should lead to smaller market moves. Average Range on day is 1.5% |