Future are holding gains from Fridays close near the 3850 area. Negative gamma levels decrease, and the Put Wall shifts lower to 3600. These changes are due to puts being closed at all strikes >=3810 (and 310 SPY). Recall on Friday that we saw net puts being closed in SPY, but not SPX.
3855 is the gamma flip line and sets up as a pivot area, with 3800 key support and 3900 resistance. Accordingly today’s estimated range is still large at 1.25%, but reduced from ~2% on Friday.
We’ll be watching the VIX (ie implied volatility) closely today as if markets hold above 3855 and VIX breaks lower then we could see a rapid market recovery. Conversely, a VIX spike and failure at 3855 brings a quick retest of 3800. We note that QQQ remains holding a large negative gamma position, indicating more volatility in the tech sector relative to S&P.
The chart below is the implied volatility of SPY options. You can see that IV closed Friday at a level that was quite high. For this to be sustained markets really need to see downward pressure and a break of 3800. We think any rise in markets, or even just sideways/range-bound move in the S&P releases that high IV and becomes a tailwind for equities.
Macro Note:
March range 3900-4000
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ | ||
|---|---|---|---|---|---|---|---|
| Ref Price: | 3835 | 3830 | 383 | 13058 | 314 | ||
| VIX Ref: | 14 | 27.19 | |||||
| SG Gamma Index™: | -0.25 | -0.47 | -0.09 | -0.01 | -0.13 | ||
| Gamma Notional(MM): | $-149 | $-365 | $36 | $0 | $-807 | ||
| SGI Imp. 1 Day Move: | 1.25%, | 48.0 pts | Range: 3787.0 | 3883.0 | ||||
| SGI Imp. 5 Day Move: | 3835 | 5.28% | Range: 3633.0 | 4038.0 | ||||
| Zero Gamma Level(ES Px): | 3855 | 3879 | — | 0 | |||
| Vol Trigger™(ES Px): | 3855 | 3865 | 384 | 13300 | 328 | ||
| SG Abs. Gamma Strike: | 3800 | 3800 | 380 | 12800 | 315 | ||
| Put Wall Support: | 3600 | 3850 | 380 | 12500 | 310 | ||
| Call Wall Strike: | 4000 | 4000 | 395 | 13700 | 340 | ||
| CP Gam Tilt: | 0.92 | 0.79 | 1.01 | 0.97 | 0.45 | ||
| Delta Neutral Px: | 3731 | ||||||
| Net Delta(MM): | $1,263,364 | $1,278,467 | $198,346 | $38,492 | $82,672 | ||
| 25D Risk Reversal | -0.11 | -0.11 | -0.11 | -0.11 | -0.11 | ||
| Top Absolute Gamma Strikes: SPX: [3900, 3850, 3800, 3700] SPY: [395, 390, 385, 380] QQQ: [320, 315, 310, 300] NDX:[13700, 13000, 12800, 12500] SPX Combo: [3926.0, 3726.0, 3922.0, 3776.0, 3853.0] NDX Combo: [12885.0, 13093.0, 13302.0, 12676.0] The Volatility Trigger has moved DOWN: 3855 from: 3865 The PutWall has moved to: 3600 from: 3850 SPX is below the Volatility Trigger™. The 3855.0 level is first level of resistance and is critical as its the negative gamma threshold. The trigger level of: 3855 will act as overhead resistance. Watching VIX is key, if volatility comes in dealers will start to buy back shares as their short puts lose value. This could start a rally. The total gamma has moved has moved UP: $-150MM from: $-365.00MM Gamma is tilted towards Puts, may indicate puts are expensive Negative gamma is moderate favoring further swings in the market |
