| Futures push higher to 3550 this morning, which is where our Call Wall now sits. There is little in the way of call options in SPX above here, and that is supported by looking at the Gamma Graphs below. Note the notional gamma (horizontal blue line) declines after 3550. Compare that to QQQ which doesnt see gamma drop off until 310. Obviously SPX has been trailing tech/QQQ for some time but the interesting thing is that SPY gamma tops out, too. Normally I would read this as a bearish signal, but I am of the opinion that much of this lack of S&P call positioning is due to the performance chase in single stocks. Why buy SPY when AAPL returns 5x?
We had a few inquiries last night about what might break the call gamma cycle down. While an “unknown” event is an obvious one, I think there is some point at which dealers can’t hold more inventory. For extreme moves the only way to hedge options is with options. This is because options have convex return profiles, whereas stock is linear. Because of this dealers must own options at the “tails” to protect themselves. When dealers own those options, their hedging profile changes such that they become sellers as those stocks go higher. Watching to see when implied volatility tops out in single stocks may be key to detecting this dealer shift. For today we note resistance at 3584 and support at 3534 with 3550 being the key “pivot” area. We do look at the Call Wall as a market topping area, but the single stock speculation may be dragging SPX through resistance. |
| Market Outlook: |
| 3400 low to 3500 top into September. |
| Event | Time EST | Actual | Forecast | Previous |
| ADP Non-Farm Employment Change | 8:15am | 1250K | 167K | |
| Crude Oil Inventories | -2.0M | -4.7M |
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ |
| Ref Price: | 3539 | 3524 | 354 | 12392 | 299 |
| VIX Ref: | 26.12 | 26.15 | |||
| SG Gamma Index™: | 0.77 | 0.99 | 0.16 | 0.02 | 0.01 |
| Gamma Notional(MM): | $838.00 | $573.00 | $1,384.00 | $2.00 | $89.00 |
| SGI Imp. 1 Day Move: | 0.72%, | 25.0 pts, Range: | 3514.0 | 3564.0 | ||
| SGI Imp. 5 Day Move: | 3497.75 | 1.96% | 3470.0 | 3608.0 | ||
| Zero Gamma Level(ES Px): | 3374 | 3360 | — | ||
| Vol Trigger™(ES Px): | 3315 | 3500 | 348 | 10000 | 290 |
| High Gamma Strike Resistance: | 3550 | 3510 | 355 | 11575 | 300 |
| SG Abs. Gamma Strike: | 3500 | 3500 | 350 | 11575 | 300 |
| Put Wall Support: | 3000 | 3500 | 310 | 10000 | 255 |
| Call Wall Strike: | 3550 | 3510 | 355 | 11575 | 300 |
| CP Gam Tilt: | 1.46 | 1.57 | 1.68 | 1.56 | 1.12 |
| Delta Neutral Px: | 3233.0 | ||||
| Net Delta(MM): | $13,033.00 | $14,118.00 | $2,369.00 | $402.00 | $819.00 |
| 25D Risk Reversal | -0.08 | -0.08 | -0.08 | -0.08 | -0.07 |
| Model Forecast: |
| Top Absolute Gamma Strikes: SPX: [3550, 3500, 3450, 3400] SPY: [355, 352, 351, 350] QQQ: [300, 292, 290, 285] NDX:[11575, 11400, 11000, 10025] SPX Combo: [3567.0, 3518.0, 3543.0] NDX Combo: [12410.0, 12497.0, 12621.0] The Volatility Trigger has moved DOWN: 3315 from: 3500 The PutWall has moved to: 3000 from: 3500 The Call Wall has moved to: 3550 from: 3510 The High Gamma Strike has moved to: 3550 from: 3510 SPX resistance is: 3550. Support is: 3500 .Reference ‘Intraday Support’ levels for support areas. The total gamma has moved has moved UP: $837.00MM from: $573.00MM 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% |