Futures push higher overnight to the 3800 large gamma strike. The VIX is indicating down 3 pts to 27 (-10%), which added to the equity tailwind. Call open interest increased 15k at 3800, and we note the first resistance level showing up at 3812 and then 3838. We see little support until 3750.
The “void” mentioned yesterday still exists down from 3800 to 3750, and despite this quick rebound we get a sense of tone change in positioning. Notional gamma levels remain low which infers higher volatility (SG Index = 1% today) and put prices have ticked up vs calls as you can see below (chart definition here).
You can chose to look at this in 1 of 2 ways:
1) Markets are now better hedged, and stock buyers/call buyers can step in off of 3800 and push to the 3900 Call Wall fueled by declining implied volatility (ie vanna)
2) Call buying is fading and markets are structurally weakening/topping
Many of you will rightfully say to this: “Thanks SG, the market could go up, or could go down”. Our point is that markets appears poised for further volatility, with little positive gamma until 3850, and a void down into 3700.
Note this long term chart of realized volatility (complete with technical analysis!). There is no doubt the “amplitude” of market movement has increased since the Covid Crash, but it also appears poised to break out.
Similarly to the breakout above, this chart of the SPX defines the importance of all that gamma at 3800. Through January markets made no headway and lacked conviction, which syncs with markets starting again today at 3800.
Macro Note:
3700-3900 into Feb OPEX
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ | ||
|---|---|---|---|---|---|---|---|
| Ref Price: | 3788 | 3758 | 378 | 13325 | 322 | ||
| VIX Ref: | 30.24 | 30.24 | |||||
| SG Gamma Index™: | 0.20 | -0.29 | -0.03 | 0.02 | -0.04 | ||
| Gamma Notional(MM): | $66 | $-73 | $206 | $3 | $-238 | ||
| SGI Imp. 1 Day Move: | 1.02%, | 39.0 pts | Range: 3749.0 | 3827.0 | ||||
| SGI Imp. 5 Day Move: | 3743 | 1.59% | Range: 3683.0 | 3803.0 | ||||
| Zero Gamma Level(ES Px): | 3750 | 3748 | — | 0 | |||
| Vol Trigger™(ES Px): | 3740 | 3740 | 376 | 12675 | 320 | ||
| SG Abs. Gamma Strike: | 3800 | 3800 | 380 | 12800 | 315 | ||
| Put Wall Support: | 3600 | 3550 | 370 | 11500 | 310 | ||
| Call Wall Strike: | 3900 | 3900 | 395 | 12825 | 330 | ||
| CP Gam Tilt: | 1.09 | 0.94 | 1.08 | 1.41 | 0.77 | ||
| Delta Neutral Px: | 3685 | ||||||
| Net Delta(MM): | $1,043,008 | $1,053,939 | $184,029 | $35,623 | $70,311 | ||
| 25D Risk Reversal | -0.13 | -0.16 | -0.12 | -0.13 | -0.12 | ||
| Top Absolute Gamma Strikes: SPX: [3850, 3800, 3750, 3700] SPY: [385, 380, 375, 370] QQQ: [325, 320, 315, 310] NDX:[13000, 12825, 12800, 12600] SPX Combo: [3861.0, 3812.0, 3887.0, 3838.0, 3880.0] NDX Combo: [13639.0] The PutWall has moved to: 3600 from: 3550 SPX resistance is: 3800 .Reference ‘Intraday Support’ levels for support areas. The total gamma has moved has moved UP: $65MM from: $-73.00MM 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% |
