| Futures tested 2970 overnight before reverting towards yesterdays cash close level. We saw a bunch of interesting shifts in levels overnight. First, it appears that there was a reduction in calls at both the 2900 and 3000 strike. There was also a lot of put activity at 2900. Net this leaves 3000 reading as our “top absolute gamma” strike, but just barely larger than 2900. This means we have two large gamma zones: 2900 and 3000 (see top chart here). The question outstanding is which zone has the most pull? The 2900/3000 range could be an area that takes some time to resolve (aka consolidation) if equity/futures volumes remain low. This would elevate the impact of dealer gamma and hedging, which is tied to these zones and make help the range hold. If you note the SG Index forward return estimate is 0.8% backing this idea of consolidation. With these two large gamma zones we see 2900 as support and 3000 top, with the market tending to mean revert around key levels. Finally I’d note a jump in the zero gamma level to the 2925 area. I believe this is reflecting this somewhat strange “polarity” of 2900/3000 and defer to the Volatility Trigger as a more reasonable expectation of where gamma shifts from positive to negative. See the diagram in the Glossary below for details on the key difference between these levels. |
| Market Outlook: |
| Larger picture indicates 3000 as top of range, with 2900 the bottom. 2900 key to maintaining positive gamma. |
| Event | Time EST | Actual | Forecast | Previous |
| Unemployment Claims | 3500K | 4427K | ||
| Personal Spending m/m | -4.8% | 0.2% | ||
| Chicago PMI | 9:45am | 38.0 | 47.8 |
| Signal Name | Latest Data | Previous |
| SPX Ref: | 2936 | 2950 |
| VIX Ref: | 31.61 | 31.23 |
| SG Gamma Index: | 0.41 | -0.13 |
| Gamma Per Point: | $97.76MM | $96.11MM |
| SGI Imp. 1SD Move: | 0.8% | |
| Zero Gamma Level: | 2927.0 | 2891.0 |
| Vol Trig: | 2855 | 2845 |
| High Gamma Strike Resistance: | 2950 | 2900 |
| Top Abs. Gamma Strike: | 3000 | 2800 |
| Put Wall Support: | 2500 | 2500 |
| Call Wall Strike: | 2950 | 2900 |
| CP Gam Tilt: | 1.07 | 1.18 |
| Delta Neutral Px: | 2820.0 | |
| Net Delta: | $14,993.61MM | $14,964.47MM |
| 25D Risk Reversal | -0.12 | -0.13 |
| Model Forecast: |
| Top Absolute Gamma Strikes: [3000, 2800, 2900, 2950, 2850] The Volatility Trigger has moved UP: 2855 from: 2845 The Call Wall has moved to: 2950 from: 2900 The High Gamma Strike has moved to: 2950 from: 2900 SPX resistance is: 3000 .Reference ‘Intraday Support’ levels for support areas. The total gamma has moved DOWN: $2,866.99MM from: $2,916.00MM Gamma is tilted towards Puts, may indicate puts are expensive Positive gamma is high. Markets tend to have little movement (Average High/Low Range of SPX PX = 0.50%) and markets tend to be mean reverting. |