Futures are flat to start the day as attention shifts towards tomorrows FOMC announcement. There was little change in SG levels overnight, buy we note that the 3900 Call Wall picked up in size due to ~15k calls being added at that strike.
This is an interesting divergence from SPY wherein the Call Wall holds at 385 with little 390 call action. As a result of this 3900 call addition in SPX we see the major Combo Bar (SPY+SPX) resistance line shift from 3857 to 3872. Therefore it seems there is a bit more room to the upside now versus the ~3850 resistance area we’ve seen. The downside critical risk line remains 3800.
While we have been focused on concerns of a violent downside move we respect the desire of market participants to continue pushing markets higher. This is true of the incoming FOMC meeting for which implied volatility(IV) is usually elevated. More often than not, IV declines following the Feds speech, and that can provide a vanna based boost for markets.
For this reason we reiterate the importance of the Volatility Trigger level (currently 3785) as a downside timing mechanism. Timing selloffs in these “euphoric” situations is often a fools errand, and so we wait for the “alert” signal when markets cross this critical risk level.
You can see here how that metric has market the onset of large drawdowns such as late 2018 and Feb 2020.
Macro Note:
Feb Range 3750-3850
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ | ||
|---|---|---|---|---|---|---|---|
| Ref Price: | 3825 | 3848 | 382 | 13392 | 328 | ||
| VIX Ref: | 23.19 | 23.19 | |||||
| SG Gamma Index™: | 0.85 | 0.78 | 0.12 | 0.02 | 0.01 | ||
| Gamma Notional(MM): | $88 | $313 | $276 | $2 | $25 | ||
| SGI Imp. 1 Day Move: | 0.88%, | 34.0 pts | Range: 3791.0 | 3859.0 | ||||
| SGI Imp. 5 Day Move: | 3849 | 2.0% | Range: 3773.0 | 3927.0 | ||||
| Zero Gamma Level(ES Px): | 3787 | 3781 | — | 0 | |||
| Vol Trigger™(ES Px): | 3785 | 3770 | 381 | 12575 | 323 | ||
| SG Abs. Gamma Strike: | 3800 | 3800 | 380 | 12800 | 320 | ||
| Put Wall Support: | 3550 | 3550 | 370 | 11500 | 300 | ||
| Call Wall Strike: | 3900 | 3900 | 385 | 12825 | 330 | ||
| CP Gam Tilt: | 1.46 | 1.3 | 1.11 | 1.4 | 1.03 | ||
| Delta Neutral Px: | 3638 | ||||||
| Net Delta(MM): | $1,066,757 | $1,054,599 | $170,439 | $35,789 | $65,312 | ||
| 25D Risk Reversal | -0.09 | -0.09 | -0.08 | -0.08 | -0.08 | ||
| Top Absolute Gamma Strikes: SPX: [3900, 3850, 3800, 3700] SPY: [400, 390, 385, 380] QQQ: [330, 325, 320, 315] NDX:[13500, 12825, 12800, 12600] SPX Combo: [3872.0, 3845.0, 3822.0, 3921.0, 3841.0] NDX Combo: [13487.0, 13768.0, 13688.0] The Volatility Trigger has moved UP: 3785 from: 3770 SPX resistance is: 3900. Support is: 3800 .Reference ‘Intraday Support’ levels for support areas. The total gamma has moved DOWN: $88MM from: $312.00MM 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% |
