Futures have trended lower overnight, with the ES back to yesterdays opening price of 3915. SG data is little changed with key support at 3900 and resistance 3950. Yesterday there was large OI added to the 3900 strike (~30k calls, ~40k puts) which serves to establish that level as a strong magnet going forward. The edge remains with bulls while markets are >3900, but we continue to view risk as quite high on a break 3900.
Our risk reversal metric signals that calls are at or near the highest price since the Covid-crash which can likely be attributed to both call demand and lower implied volatility (ie VIX). The other way to frame this is that “puts are cheap”, but which is not surprising as we wrote over the weekend – demand for downside is nil.
Finally we note that QQQ seems to have also run out of “short cover fuel” as estimated by our vanna charts. In the chart below our model suggests that as QQQ price shifts higher, and accounting for implied volatility changes, dealers may now be selling some QQQ. This is a start difference from the last several days/weeks.
The green line is where we estimate dealers to be “delta neutral”, and so as price moves higher and implied volatility shifts (black line) dealers may have stock to sell. This is implied by the fact that the black line shifts higher (green arrow) and, and the way to get that long market exposure back to the green line is to add short hedges.
Macro Note:
3900-4000 key April Range.
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ | ||
|---|---|---|---|---|---|---|---|
| Ref Price: | 3919 | 3932 | 392 | 13004 | 318 | ||
| VIX Ref: | 18.88 | 18.88 | |||||
| SG Gamma Index™: | 0.69 | 0.17 | 0.05 | 0.01 | -0.08 | ||
| Gamma Notional(MM): | $72 | $235 | $255 | $1 | $-473 | ||
| SGI Imp. 1 Day Move: | 1.26%, | 49.0 pts | Range: 3870.0 | 3968.0 | ||||
| SGI Imp. 5 Day Move: | 3907 | 2.03% | Range: 3828.0 | 3986.0 | ||||
| Zero Gamma Level(ES Px): | 3909 | 3893 | — | 0 | |||
| Vol Trigger™(ES Px): | 3890 | 3890 | 392 | 12675 | 319 | ||
| SG Abs. Gamma Strike: | 3900 | 3900 | 395 | 12850 | 310 | ||
| Put Wall Support: | 3800 | 3700 | 380 | 11000 | 310 | ||
| Call Wall Strike: | 4000 | 4000 | 395 | 12850 | 330 | ||
| CP Gam Tilt: | 1.31 | 1.21 | 1.09 | 1.09 | 0.66 | ||
| Delta Neutral Px: | 3784 | ||||||
| Net Delta(MM): | $987,249 | $875,367 | $144,592 | $33,510 | $70,063 | ||
| 25D Risk Reversal | -0.06 | -0.08 | -0.05 | -0.06 | -0.05 | ||
| Top Absolute Gamma Strikes: SPX: [4000, 3950, 3925, 3900] SPY: [400, 395, 393, 390] QQQ: [330, 315, 310, 300] NDX:[13750, 13500, 13000, 12850] SPX Combo: [3980.0, 3945.0, 3929.0, 3874.0, 3956.0] NDX Combo: [12668.0] The PutWall has moved to: 3800 from: 3700 SPX resistance is: 4000. Support is: 3900 .Reference ‘Intraday Support’ levels for support areas. The total gamma has moved DOWN: $72MM from: $234.00MM 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% |
