Futures are marginally higher to 3745, up from overnight lows of 3725. The Call Wall fails to roll higher, which indicates the SPX may open at our above strong resistance. This does not imply a selloff is warranted, but possibly consolidation. To that point we have fairly robust positive gamma levels and as a result our models anticipate a fairly tight trading range (SG implied move=0.67%) in the 3700-3750 area.
As we discussed yesterday there are tailwinds at the start of the year as end of year hedges roll off and the GA election moves behind us. We’re not sold on the idea that the elections matter the market at large – we anticipate volatility to decline regardless of outcome. Slumping implied vols combined with “call fuel” and stimulus seem to align for a bullish slant to markets.
Taking this short term setup into account, we have major “sentiment” concerns a bit farther out. Consider this chart below which outlines the equity put/call ratio going back to 2007. We’ve highlighted with grey lines when options were most skewed toward calls. First, you can see that we are seeing historic extremes in PC ratios – but the forward returns following these extremes look poor. Obviously in the context of this +10 year log scale timeframe these are “blips”, but in the moment they were some fairly violet drawdowns.
Macro Note:
3700-3750
| SIGNAL NAME | LATEST DATA | PREVIOUS | SPY | NDX | QQQ | ||
|---|---|---|---|---|---|---|---|
| Ref Price: | 3743 | 3729 | 374 | 12879 | 312 | ||
| VIX Ref: | 21.7 | 21.7 | |||||
| SG Gamma Index™: | 1.02 | 0.75 | 0.17 | 0.02 | 0.03 | ||
| Gamma Notional(MM): | $476.00 | $498.00 | $1,378.00 | $2.00 | $138.00 | ||
| SGI Imp. 1 Day Move: | 0.67%, | 25.0 pts | Range: 3718.0 | 3768.0 | ||||
| SGI Imp. 5 Day Move: | 3721 | 2.46% | Range: 3630.0 | 3813.0 | ||||
| Zero Gamma Level(ES Px): | 3678 | 3664 | — | 0 | |||
| Vol Trigger™(ES Px): | 3670 | 3670 | 369 | 12575 | 311 | ||
| SG Abs. Gamma Strike: | 3700 | 3700 | 375 | 12800 | 315 | ||
| Put Wall Support: | 3500 | 3500 | 360 | 10500 | 278 | ||
| Call Wall Strike: | 3750 | 3750 | 375 | 12725 | 315 | ||
| CP Gam Tilt: | 1.57 | 1.51 | 1.66 | 1.39 | 1.16 | ||
| Delta Neutral Px: | 3507 | ||||||
| Net Delta(MM): | $1,014,125.00 | $995,384.00 | $144,385.00 | $30,510.00 | $58,596.00 | ||
| 25D Risk Reversal | -0.08 | -0.09 | -0.07 | -0.08 | -0.08 | ||
| Top Absolute Gamma Strikes: SPX: [3750, 3725, 3700, 3650] SPY: [380, 375, 370, 365] QQQ: [320, 315, 310, 300] NDX:[13000, 12800, 12725, 12600] SPX Combo: [3759.0, 3771.0, 3808.0, 3711.0, 3786.0] NDX Combo: [12970.0, 12892.0, 12931.0, 12764.0] SPX resistance is: 3750. Support is: 3700 .Reference ‘Intraday Support’ levels for support areas. The total gamma has moved DOWN: $476.04MM from: $497.00MM Positive gamma is moderate which should lead to smaller market moves. Average Range on day is 1.5% |
